Est1 and Ebs1 in Saccharomyces cerevisiae are paralogous proteins that arose through whole-genome duplication and that serve distinct functions in telomere maintenance and translational regulation. Here we present our functional analysis of the sole Est1/Ebs1 homologue in the related budding yeast Kluyveromyces lactis (named KlEst1). We show that similar to other Est1s, KlEst1 is required for normal telomere maintenance in vivo and full telomerase primer extension activity in vitro. KlEst1 also associates with telomerase RNA (Ter1) and an active telomerase complex in cell extracts. Both the telomere maintenance and the Ter1 association functions of KlEst1 require its N-terminal domain but not its C terminus. Analysis of clusters of point mutations revealed residues in both the N-terminal TPR subdomain and the downstream helical subdomain (DSH) that are important for telomere maintenance and Ter1 association. A UV cross-linking assay was used to establish a direct physical interaction between KlEst1 and a putative stem-loop in Ter1, which also requires both the TPR and DSH subdomains. Moreover, similar to S. cerevisiae Ebs1 (ScEbs1) (but not ScEst1), KlEst1 confers rapamycin sensitivity and may be involved in nonsense-mediated decay. Interestingly, unlike telomere regulation, this apparently separate function of KlEst1 requires its C-terminal domain. Our findings provide insights on the mechanisms and evolution of Est1/Ebs1 homologues in budding yeast and present an attractive model system for analyzing members of this multifunctional protein family.