Reactive oxygen species (ROS) are natural by‐products of cellular respiration, essential for cell signaling. They are also a major threat to telomere stability and can trigger senescence. Emerging studies reveal a broad role for telomere‐associated factors in modulating the response to oxidative stress. PROTECTION OF TELOMERES 1 (POT1) is one of the most conserved telomeric proteins, critical for both chromosome‐end protection and replication. POT1 is a single‐copy gene in most species. However, the flowering plant Arabidopsis thaliana encodes two highly divergent POT1 paralogs, AtPOT1a and AtPOT1b. AtPOT1a is an essential telomerase‐associated processivity factor. In contrast, AtPOT1b is not required for telomere replication or end protection, and its overexpression cannot complement the loss of AtPOT1a. Here we explore the natural separation‐of‐function within Arabidopsis POT1 paralogs and uncover a novel role for AtPOT1b in redox homeostasis. AtPOT1b expression is highly regulated, and restricted to seeds, root tips, and gametophytes, organs whose development is controlled by endogenous ROS. Strikingly, ectopic over‐expression of AtPOT1b decreases natural ROS levels throughout the plant, while a null mutation results in high levels of cellular and genomic oxidation, telomere length changes under multiple environmental insults, decreased chromatin compaction, decreased DNA methylation and increased expression of stress‐response genes. Consequently, atpot1b mutants have reduced fitness and are hypersensitive to chemical and environmental stresses. Finally, in response to oxidative stress, AtPOT1b expression increases and the protein accumulates at telomeres, suggesting that AtPOT1b may play a direct role in mitigating telomere oxidation. We postulate that AtPOT1b functions in a molecular rheostat that both senses and regulates cellular oxidation, thereby promoting genome stability in tissues where higher ROS levels are required for development.