The mammalian Ku70 and Ku86 proteins form a heterodimer that binds to the ends of double-stranded DNA in vitro and is required for repair of radiation-induced strand breaks and V(D)J recombination [1,2]. Deletion of the Saccharomyces cerevisiae genes HDF1 and HDF2--encoding yKu70p and yKu80p, respectively--enhances radiation sensitivity in a rad52 background [3,4]. In addition to repair defects, the length of the TG-rich repeat on yeast telomere ends shortens dramatically [5,6]. We have shown previously that in yeast interphase nuclei, telomeres are clustered in a limited number of foci near the nuclear periphery , but the elements that mediate this localization remained unknown. We report here that deletion of the genes encoding yKu70p or its partner yKu80p altered the positioning of telomeric DNA in the yeast nucleus. These are the first mutants shown to affect the subnuclear localization of telomeres. Strains deficient for either yKu70p or yKu80p lost telomeric silencing, although they maintained repression at the silent mating-type loci. In addition, the telomere-associated silencing factors Sir3p and Sir4p and the TG-repeat-binding protein Rap1p lost their punctate pattern of staining and became dispersed throughout the nucleoplasm. Our results implicate the yeast Ku proteins directly in aspects of telomere organization, which in turn affects the repression of telomere-proximal genes.