As in human cells, yeast telomeres can be maintained in cells lacking telomerase activity by recombination-based mechanisms known as ALT (Alternative Lengthening of Telomeres). A hallmark of ALT human cancer cells are extrachromosomal telomeric DNA elements called C-circles, whose origin and function have remained unclear. Here, we show that extrachromosomal telomeric C-circles in yeast can be detected shortly after senescence crisis and concomitantly with the production of survivors arising from “type II” recombination events. We uncover that C-circles bind to the nuclear pore complex (NPC) and to the SAGA-TREX2 complex, similar to other non-centromeric episomal DNA. Disrupting the integrity of the SAGA/TREX2 complex affects both C-circle binding to NPCs and type II telomere recombination, suggesting that NPC tethering of C-circles facilitates formation and/or propagation of the long telomere repeats characteristic of type II survivors. Furthermore, we find that disruption of the nuclear diffusion barrier impairs type II recombination. These results support a model in which concentration of C-circles at NPCs benefits type II telomere recombination, highlighting the importance of spatial coordination in ALT-type mechanisms of telomere maintenance.