Mutations in the shelterin protein POT1 are associated with diverse cancers, but their role in cancer progression remains unclear. To resolve this, we performed deep scanning mutagenesis in POT1 locally haploid human stem cells to assess the impact of POT1 variants on cellular viability and cancer-associated telomeric phenotypes. Though POT1 is essential, frame-shift mutants are rescued by chemical ATR inhibition, indicating that POT1 is not required for telomere replication or lagging strand synthesis. In contrast, a substantial fraction of clinically-validated pathogenic mutations support normal cellular proliferation, but still drive ATR-dependent telomeric DNA damage signaling and ATR-independent telomere elongation. Moreover, this class of cancer-associated POT1 variants elongates telomeres more rapidly than POT1 frame-shifts, indicating they actively drive oncogenesis and are not simple loss-of-function mutations.