Background: Telomere dysfunction triggers cellular senescence and constitutes a driving force for cancer initiation. Genetic variants in genes involved in telomere maintenance may contribute to colorectal cancer susceptibility. Methods: In this study, we firstly captured germline mutations in 192 patients with colorectal cancer by sequencing the coding regions of 13 core components implicated in telomere biology. Five potential functional variants were then genotyped and assessed in a case–control set with 3,761 colorectal cancer cases and 3,839 healthy controls. The promising association was replicated in additional 6,765 cases and 6,906 controls. Functional experiments were used to further clarify the potential function of the significant variant and uncover the underlying mechanism in colorectal cancer development. Results: The two-stage association studies showed that a rare missense variant rs149418249 (c.C1520T and p.P507L) in the 11th exon of TPP1 (also known as ACD, gene ID 65057) was significantly associated with colorectal cancer risk with the ORs being 2.90 [95% confidence interval (CI), 1.04–8.07; P = 0.041], 2.50 (95% CI, 1.04–6.04; P = 0.042), and 2.66 (95% CI, 1.36–5.18; P = 0.004) in discovery, replication, and the combined samples, respectively. Further functional annotation indicated that the TPP1 P507L substitution interrupted TPP1–TIN2 interaction, impaired telomerase processivity, and shortened telomere length, which subsequently facilitated cell proliferation and promoted colorectal cancer development. Conclusions: A rare variant P507L in TPP1 confers increased risk of colorectal cancer through interrupting TPP1–TIN2 interaction, impairing telomerase processivity, and shrinking telomere length. Impact: These findings emphasize the important role of telomere dysfunction in colorectal cancer development, and provide new insights about the prevention of this type of cancer.