Human telomeres consist of thousands of base pairs of double-stranded TTAGGG repeats, organized by histone proteins into tightly spaced nucleosomes. The double-stranded telomeric repeats are also specifically bound by the telomeric proteins hTRF1 and hTRF2, which are essential for telomere length maintenance and for chromosome protection. An unresolved question is what role nucleosomes play in telomere structure and dynamics and how they interact and/or compete with hTRF proteins. Here we show that hTRF1 specifically induces mobility of telomeric nucleosomes. Moreover, Atomic Force Microscopy (AFM) imaging shows that hTRF1 induces compaction of telomeric DNA only in the presence of a nucleosome, suggesting that this compaction occurs through hTRF1-nucleosome interactions. Our findings reveal an unknown property of hTRF1 that has implications for understanding telomere structure and dynamics.