Malignant cells achieve replicative immortality by two alternative mechanisms, a common one dependent on de novo synthesis of telomeric DNA by telomerase, and a rare one based on telomere recombination known as alternative lengthening of telomeres (ALT). Epstein-Barr virus (EBV) transforms human B-lymphocytes into lymphoblastoid cell lines with unlimited growth potential in vitro and in vivo. Here we show that newly EBV-infected cells exhibit multiple signs of telomere dysfunction, including the occurrence of extra-chromosomal telomeres, telomere fusion and telomere length heterogeneity, and undergo progressive increase in telomere length without a parallel increase in telomerase activity. This phenotype is accompanied by the accumulation of telomere-associated promyelocytic leukemia nuclear bodies and telomeric-sister chromatid exchange, suggesting that EBV infection promotes the activation of ALT. Newly infected cells also display a significant reduction of telomere-associated TRF2 and express low levels of TRF1, TRF2, POT1 and ATRX, pointing to telomere de-protection as an important correlate of ALT activation. Collectively, these findings highlight the involvement of recombination-dependent mechanisms for maintenance of telomere homeostasis in EBV-induced B-cell immortalization.