Germline telomere maintenance defects are associated with an increased incidence of inflammatory diseases in humans, yet whether and how telomere dysfunction causes inflammation are not known. Here, we show that telomere dysfunction drives pATM/c-ABL-mediated activation of the YAP1 transcription factor, up-regulating the major pro-inflammatory factor, pro-IL-18. The colonic microbiome stimulates cytosolic receptors activating caspase-1 which cleaves pro-IL-18 into mature IL-18, leading to recruitment of interferon (IFN)-γ-secreting T cells and intestinal inflammation. Correspondingly, patients with germline telomere maintenance defects exhibit DNA damage (γH2AX) signaling together with elevated YAP1 and IL-18 expression. In mice with telomere dysfunction, telomerase reactivation in the intestinal epithelium or pharmacological inhibition of ATM, YAP1, or caspase-1 as well as antibiotic treatment, dramatically reduces IL-18 and intestinal inflammation. Thus, telomere dysfunction-induced activation of the ATM-YAP1-pro-IL-18 pathway in epithelium is a key instigator of tissue inflammation.