Telomeres have 3′ single-stranded overhangs that provide substrates for telomerase extension and prevent chromosome ends from being recognized as double-stranded breaks. But how these overhangs are generated and coordinated with the cell cycle has been unknown. Using a combination of biochemical assays, Wright and colleagues now provide insight into the dynamics of telomere overhang formation, revealing an intricate sequence of events. Showing that mature telomere overhangs form within 2 hours of replication in human fibroblast cells, the authors observed that lagging strands have a mature overhang almost immediately after replication. Intriguingly, the final RNA primer of Okazaki-fragment synthesis, which has been thought to be positioned at the very end of the lagging chromosome strand, is instead positioned ∼70–100 nucleotides from the end and is not removed for more than 1 hour, defining a specific C-terminal nucleotide. By contrast, leading strands develop a mature overhang only 1–2 hours after replication, and the terminal nucleotide is not specified until the S-to-G2 transition. Together, this suggests that telomere overhang processing occurs in two stages, with the early phase occurring in S phase directly following replication of the duplex telomeric DNA, while the late phase occurs several hours later in the S-to-G2 transition, leaving a considerable delay between the first and second phase. The present work sets the scene for identifying the different factors required for each step and understanding how each step is regulated. (Genes Dev. 26, 1167–1178, 2012)