The vast majority of human cancers express telomerase activity, while most human somatic cells do not have detectable telomerase activity. Since telomerase plays a critical role in cell immortality, it is an attractive target for a selective cancer therapy. Oligonucleotides complementary to the RNA template region of human telomerase (hTR) have been shown to be effective inhibitors of telomerase and, subsequently, cancer cell growth in vitro. We show here that a lipid-modified N3'-->P5' thio-phosphoramidate oligonucleotide (GRN163L) inhibits telomerase more potently than its parental nonconjugated thio-phosphoramidate sequence (GRN163). Cells were treated with both the first- (GRN163) and second-generation (GRN163L) oligonucleotides, including a mismatch control, with or without a transfection enhancer reagent. GRN163L inhibited telomerase activity effectively in a dose-dependent manner, even without the use of a transfection reagent. The IC50 values for GRN163 in various cell lines were on average sevenfold higher than for GRN163L. GRN163L inhibition of telomerase activity resulted in a more rapid loss of telomeres and cell growth than GRN163. This report is the first to show that lipid modification enhanced the potency of the novel GRN163 telomerase inhibitor. These results suggest that the lipid-conjugated thio-phosphoramidates could be important for improved pharmacodynamics of telomerase inhibitors in cancer therapy.