Combining RNAi in cultured cells and analysis of mutant animals, we probed the roles of known Piwi-interacting RNA (piRNA) pathway components in the initiation and effector phases of transposon silencing. Squash associated physically with Piwi, and reductions in its expression led to modest transposon derepression without effects on piRNAs, consistent with an effector role. Alterations in Zucchini or Armitage reduced both Piwi protein and piRNAs, indicating functions in the formation of a stable Piwi RISC (RNA-induced silencing complex). Notably, loss of Zucchini or mutations within its catalytic domain led to accumulation of unprocessed precursor transcripts from flamenco, consistent with a role for this putative nuclease in piRNA biogenesis.