Telomeres, found at chromosomal ends, are essential for stable maintenance of linear chromosomes in eukaryotes. The ATM family of genes, including budding yeast TEL1 (refs 1,2), fission yeast rad3+ (ref. 3) and human ATM (ref. 4), have been reported to be involved in telomere length regulation, although the significance of the telomere phenotypes observed with the mutated genes remains elusive. We have cloned tel1+, another fission yeast ATM homologue, and found that a tel1rad3 double mutant lost all telomeric DNA sequences. Thus, the ATM homologues are essential in telomere maintenance. The mutant grew poorly and formed irregular-shaped colonies, probably due to chromosome instability, however, during prolonged culture of the double mutant, cells forming normal round-shaped colonies arose at a relatively high frequency. All three chromosomes in these derivative cells were circular and lacked telomeric sequences. To our knowledge, this is the first report of eukaryotic cells whose chromosomes are all circular. Upon meiosis, these derivative cells produced few viable spores. Therefore, the exclusively circular genome lacking telomeric sequences is proficient for mitotic growth, but does not permit meiosis.