To determine the role of telomere dysfunction and telomerase reactivation in generating pro-oncogenic genomic events and in carcinoma progression, an inducible telomerase reverse transcriptase (mTert) allele was crossed onto a prostate cancer-prone mouse model null for Pten and p53 tumor suppressors. Constitutive telomerase deficiency and associated telomere dysfunction constrained cancer progression. In contrast, telomerase reactivation in the setting of telomere dysfunction alleviated intratumoral DNA-damage signaling and generated aggressive cancers with rearranged genomes and new tumor biological properties (bone metastases). Comparative oncogenomic analysis revealed numerous recurrent amplifications and deletions of relevance to human prostate cancer. Murine tumors show enrichment of the TGF-β/SMAD4 network, and genetic validation studies confirmed the cooperative roles of Pten, p53, and Smad4 deficiencies in prostate cancer progression, including skeletal metastases. Thus, telomerase reactivation in tumor cells experiencing telomere dysfunction enables full malignant progression and provides a mechanism for acquisition of cancer-relevant genomic events endowing new tumor biological capabilities. Display omitted ► Telomerase reactivation in murine prostate cancer model promotes malignant progression ► The malignancies acquire capabilities, such as bone metastases, typical of human disease ► The telomere-based genome instability generates human-relevant genomic aberrations ► Comparative genomic analysis identifies a prognosis signature with clinical potential Tumors cells that initially acquire dysfunctional telomeres do not exhibit genomic instability until telomerase becomes reactivated. Genetically engineering this sequence of events in mice promotes a malignant progression in prostate cancer that reproduces features of the human disease and generates a genetic signature with potential prognostic value.