Cellular senescence has been associated with the structural and functional decline observed during physiological lung ageing and in chronic obstructive pulmonary disease (COPD). Airway epithelial cells are the first line of defense in the lungs and are important to COPD pathogenesis. However, the mechanisms underlying airway epithelial cell senescence, and particularly the role of telomere dysfunction in this process, are poorly understood. We aimed to investigate telomere dysfunction in airway epithelial cells from patients with COPD, in the ageing murine lung and following cigarette smoke exposure. We evaluated co-localization of H2A.X and telomeres and telomere length in small airway epithelial cells from patients with COPD, during murine lung ageing and following cigarette smoke exposure in vivo and in vitro. We found that telomere-associated DNA damage foci increase in small airway epithelial cells from patients with COPD, without significant telomere shortening detected. With age, telomere-associated foci increase in small airway epithelial cells of the murine lung, which is accelerated by cigarette smoke exposure. Moreover, telomere-associated foci predict age-dependent emphysema; and late-generation Terc null mice, which harbour dysfunctional telomeres, show early-onset emphysema. We found that cigarette smoke accelerates telomere dysfunction via reactive oxygen species in vitro and may be associated with ATM-dependent secretion of inflammatory cytokines IL-6 and IL-8. We propose that telomeres are highly sensitive to cigarette smoke-induced damage and telomere dysfunction may underlie decline of lung function observed during ageing and in COPD.