Telomeric G-quadruplexes (G4) were long believed to form a protective structure at telomeres, preventing their extension by the ribonucleoprotein telomerase. Contrary to this belief, we have previously demonstrated that parallel-stranded conformations of telomeric G4 can be extended by human and ciliate telomerase. However, a mechanistic understanding of the interaction of telomerase with structured DNA remained elusive. Here, we use single-molecule fluorescence resonance energy transfer (smFRET) microscopy and bulk-phase enzymology to propose a mechanism for the resolution and extension of parallel G4 by telomerase. Binding is initiated by the RNA template of telomerase interacting with the G-quadruplex; nucleotide addition then proceeds to the end of the RNA template. It is only through the large conformational change of translocation following synthesis that the G-quadruplex structure is completely unfolded to a linear product. Surprisingly, parallel G4 stabilization with either small molecule ligands or by chemical modification does not always inhibit G4 unfolding and extension by telomerase. These data reveal that telomerase is a parallel G-quadruplex resolvase.