Telomerase-independent ALT (alternative lengthening of telomeres) cells are characterized by high frequency of telomeric homologous recombination (HR), C-rich extrachromosomal circles (C-circles) and C-rich terminal 5' overhangs (C-overhangs). However, underlying mechanism is poorly understood. Here, we show that both C-circle and C-overhang form when replication fork collapse is induced by strand break at telomeres. We find that endogenous DNA break predominantly occur on C-rich strand of telomeres in ALT cells, resulting in high frequency of replication fork collapse. While collapsed forks could be rescued by replication fork regression leading to telomeric homologous recombination, those unresolved are converted to C-circles and C-overhang at lagging and leading synthesized strand, respectively. Meanwhile, multiple hallmarks of ALT are provoked, suggesting that strand break-induced replication stress underlies ALT. These findings provide a molecular basis underlying telomeric HR and biogenesis of C-circle and C-overhang, thus implicating the specific mechanism to resolve strand break-induced replication defect at telomeres in ALT cells.