The Hsp90-associated protein p23 modulates Hsp90 activity during the final stages of the chaperone pathway to facilitate maturation of client proteins. Previous reports indicate that p23 cleavage induced by caspases during cell death triggers destabilization of client proteins. However, the specific role of truncated p23 (Delta p23) in this process and the underlying mechanisms remain to be determined. One such client protein, hTERT, is a telomerase catalytic subunit regulated by several chaperone proteins, including Hsp90 and p23. In the present study, we examined the effects of p23 cleavage on hTERT stability and telomerase activity. Our data showed that overexpression of Delta p23 resulted in a decrease in hTERT levels, and a down-regulation in telomerase activity. Serine phosphorylation of Hsp90 was significantly reduced in cells expressing high levels of Delta p23 compared with those expressing full-length p23. Mutation analyses revealed that two serine residues (Ser-231 and Ser-263) in Hsp90 are important for activation of telomerase, and down-regulation of telomerase activity by Delta p23 was associated with inhibition of cell growth and sensitization of cells to cisplatin. Our data aid in determining the mechanism underlying the regulation of telomerase activity by the chaperone complex during caspase-dependent cell death.