Nonsense-mediated mRNA decay (NMD) prevents the accumulation of transcripts bearing premature termination codons. Here we show that Saccharomyces cerevisiae NMD mutants accumulate 5'-extended RNAs (CD-CUTs) of many subtelomeric genes. Using the subtelomeric ZRT1 and FIT3 genes activated in response to zinc and iron deficiency, respectively, we show that transcription of these CD-CUTs mediates repression at the bona fide promoters, by preventing premature binding of RNA polymerase II in conditions of metal repletion. Expression of the main ZRT1 CD-CUT is controlled by the histone deacetylase Rpd3p, showing that histone deacetylases can regulate expression of genes through modulation of the level of CD-CUTs. Analysis of binding of the transcriptional activator Zap1p and insertion of transcriptional terminators upstream from the Zap1p binding sites show that CD-CUT transcription or accumulation also interferes with binding of the transcriptional activator Zap1p. Consistent with this model, overexpressing Zap1p or using a constitutively active version of the Aft1p transcriptional activator rescues the induction defect of ZRT1 and FIT3 in NMD mutants. These results show that cryptic upstream sense transcription resulting in unstable transcripts degraded by NMD controls repression of a large number of genes located in subtelomeric regions, and in particular of many metal homeostasis genes.