At critically short telomeres, stabilized TERRA RNA-DNA hybrids drive homology-directed repair (HDR) to delay replicative senescence. However, even at long- and intermediate-length telomeres, not subject to HDR, transient TERRA RNA-DNA hybrids form, suggestive of additional roles. We report that telomeric RNA-DNA hybrids prevent Exo1-mediated resection when telomeres become non-functional. We used the well-characterized cdc13-1 allele, where telomere resection can be induced in a temperature-dependent manner, to demonstrate that ssDNA generation at telomeres is either prevented or augmented when RNA-DNA hybrids are stabilized or destabilized, respectively. The viability of cdc13-1 cells is affected by the presence or absence of hybrids accordingly. Telomeric hybrids do not affect the shortening rate of bulk telomeres. We suggest that TERRA hybrids require dynamic regulation to drive HDR at short telomeres; hybrid presence may initiate HDR through replication stress, whereby their removal allows strand resection.