Short dysfunctional telomeres are capable of fusion, generating dicentric chromosomes and initiating breakage-fusion-bridge cycles. Cells that escape the ensuing cellular crisis exhibit large-scale genomic rearrangements that drive clonal evolution and malignant progression. We demonstrate that there is an absolute requirement for fully functional DNA ligase III (LIG3), but not DNA ligase IV (LIG4), to facilitate the escape from a telomere-driven crisis. LIG3- and LIG4-dependent alternative (A) and classical (C) nonhomologous end-joining (NHEJ) pathways were capable of mediating the fusion of short dysfunctional telomeres, both displaying characteristic patterns of microhomology and deletion. Cells that failed to escape crisis exhibited increased proportions of C-NHEJ-mediated interchromosomal fusions, whereas those that escaped displayed increased proportions of intrachromosomal fusions. We propose that the balance between inter- and intra-chromosomal telomere fusions dictates the ability of human cells to escape crisis and is influenced by the relative activities of A- and C-NHEJ at short dysfunctional telomeres.