Similar to its human homologues TRF1 and TRF2, fission yeast Taz1 protein is a component of telomeric chromatin regulating proper telomere maintenance. As mammalian TRF1 and TRF2 proteins have been shown to directly bind telomeric DNA to form protein arrays and looped structures, termed t-loops, the ability of Taz1p to act on fission yeast telomeric DNA in similar ways was examined using purified protein and model DNA templates. When incubated with Taz1p, model telomeres containing 3' single-stranded telomeric overhangs formed t-loops at a frequency approaching 13%. Termini with blunt ends and non-telomeric overhangs were deficient in t-loop formation. In addition, we observed arrays of multiple Taz1p molecules bound to the telomeric regions, resembling the pattern of TRF1 binding. The presence of t-loops larger than the telomeric tract, a high frequency of end-bound DNAs and a donut shape of the Taz1p complex suggest that Taz1p binds the 3' overhang then extrudes a loop that grows in size as the donut slides along the duplex DNA. Based on these in vitro results we discuss possible general implications for fission yeast telomere dynamics.