Double-strand breaks (DSBs) in chromosomal DNA elicit a rapid signaling response through the ATM protein kinase. ATM corresponds to Tel1 in budding yeast. Here we show that the catalytic activity of Tel1 is altered by protein binding at DNA ends via the Mre11-Rad50-Xrs2 (MRX) complex. Like ATM, Tel1 is activated through interaction with the MRX complex and DNA ends. In vivo, Tel1 activation is enhanced in sae2Δ or mre11-3 mutants after camptothecin treatment; both of these mutants are defective in the removal of topoisomerase I from DNA. In contrast, an sae2Δ mutation does not stimulate Tel1 activation after expression of the EcoRI endonuclease, which generates "clean" DNA ends. In an in vitro system, tethering of Fab fragments to DNA ends inhibits MRX-mediated DNA end processing but enhances Tel1 activation. The mre11-3 mutation abolishes DNA end-processing activity but does not affect the ability to enhance Tel1 activation. These results support a model in which MRX controls Tel1 activation by recognizing protein-bound DNA ends.