Telomeres are involved in the maintenance of chromosomes and the prevention of genome instability. Despite this central importance, significant variation in telomere length has been observed in a variety of organisms. The genetic determinants of telomere-length variation and their effects on organismal fitness are largely unexplored. Here, we describe natural variation in telomere length across the Caenorhabditis elegans species. We identify a large-effect variant that contributes to differences in telomere length. The variant alters the conserved oligosaccharide/oligonucleotide-binding fold of POT-2, a homolog of a human telomere-capping shelterin complex subunit. Mutations within this domain likely reduce the ability of POT-2 to bind telomeric DNA, thereby increasing telomere length. We find that telomere-length variation does not correlate with offspring production or longevity in C. elegans wild isolates, suggesting that naturally long telomeres play a limited role in modifying fitness phenotypes in C. elegans.