Cancer cells maintain their telomeres by either re-activating telomerase or adopting the homologous recombination (HR)-based Alternative Lengthening of Telomere (ALT) pathway. Among the many prominent features of ALT cells, C-circles (CC) formation is considered to be the most specific and quantifiable biomarker of ALT. However, the molecular mechanism behind the initiation and maintenance of CC formation in ALT cells is still largely unknown. We reported previously that depletion of the FANCM complex (FANCM-FAAP24-MHF1&2) in ALT cells induced pronounced replication stress, which primarily takes place at their telomeres. Here, we characterized the changes in ALT associated phenotypes in cells deficient of the FANCM complex. We found that depletion of FAAP24 or FANCM, but not MHF1&2, induces a dramatic increase of CC formation. Most importantly, we identified multiple DNA damage response (DDR) and DNA repair pathways that stimulate the dramatic increase of CC formation in FANCM deficient cells, including the dissolvase complex (BLM-TOP3A-RMI1/2, or BTR), DNA damage checkpoint kinases (ATR and Chk1), HR proteins (BRCA2, PALB2, and Rad51), as well as proteins involved in Break-Induced Replication (BIR) (POLD1 and POLD3). In addition, FANCD2, another Fanconi Anemia (FA) protein, is also required for CC formation, likely through promoting the recruitment of BLM to the replication stressed ALT telomeres. Finally, we demonstrated that TERRA R-loops accumulate at telomeres in FANCM deficient ALT cells and downregulation of which attenuates the ALT-associated PML bodies (APBs), replication stress and CC formation. Taken together, our data suggest that FANCM prevents replisomes from stalling/collapsing at ALT telomeres by disrupting TERRA R-loops.