Mobile genetic elements threaten genome integrity in all organisms. RDE-3 (also known as MUT-2) is a ribonucleotidyltransferase that is required for transposon silencing and RNA interference in Caenorhabditis elegans(1-4). When tethered to RNAs in heterologous expression systems, RDE-3 can add long stretches of alternating non-templated uridine (U) and guanosine (G) ribonucleotides to the 3 ' termini of these RNAs (designated poly(UG) or pUG tails)(5). Here we show that, in its natural context in C. elegans, RDE-3 adds pUG tails to targets of RNA interference, as well as to transposon RNAs. RNA fragments attached to pUG tails with more than 16 perfectly alternating 3 ' U and G nucleotides become gene-silencing agents. pUG tails promote gene silencing by recruiting RNA-dependent RNA polymerases, which use pUG-tailed RNAs (pUG RNAs) as templates to synthesize small interfering RNAs (siRNAs). Our results show that cycles of pUG RNA-templated siRNA synthesis and siRNA-directed pUG RNA biogenesis underlie double-stranded-RNA-directed transgenerational epigenetic inheritance in the C. elegans germline. We speculate that this pUG RNA-siRNA silencing loop enables parents to inoculate progeny against the expression of unwanted or parasitic genetic elements. In Caenorhabditis elegans, the ribonucleotidyltransferase RDE-3 adds alternating uridine and guanosine ribonucleotides to the 3 ' termini of RNAs, a key step in RNA interference and thus epigenetic inheritance in the C. elegans germline.