Androgens have been used in the treatment of bone marrow failure syndromes without a clear understanding of their mechanism of action. Blood counts of patients with dyskeratosis congenita or aplastic anemia with mutations in telomerase genes can improve with androgen therapy. Here we observed that exposure in vitro of normal peripheral blood lymphocytes and human bone marrow-derived CD34(+) cells to androgens increased telomerase activity, coincident with higher TERT mRNA levels. Cells from patients who were heterozygous for telomerase mutations had low baseline telomerase activity, which was restored to normal levels by exposure to androgens. Estradiol had an effect similar to androgens on TERT gene expression and telomerase enzymatic activity. Tamoxifen abolished the effects of both estradiol and androgens on telomerase function, and letrozole, an aromatase inhibitor, blocked androgen effects on telomerase activity. Conversely, flutamide, an androgen receptor antagonist, did not affect androgen stimulation of telomerase. Down-regulation by siRNA of estrogen receptor-alpha (ER alpha), but not ER beta, inhibited estrogen-stimulated telomerase function. Our results provide a mechanism for androgen therapy in bone marrow failure: androgens appear to regulate telomerase expression and activity mainly by aromatization and through ER alpha. These findings have potential implications for the choice of current androgenic compounds and the development of future agents for clinical use.