A growing number of functions are emerging for RNA interference (RNAi) in the nucleus, in addition to well-characterized roles in post-transcriptional gene silencing in the cytoplasm. Epigenetic modifications directed by small RNAs have been shown to cause transcriptional repression in plants, fungi and animals. Additionally, increasing evidence indicates that RNAi regulates transcription through interaction with transcriptional machinery. Nuclear small RNAs include small interfering RNAs (siRNAs) and PIWI-interacting RNAs (piRNAs) and are implicated in nuclear processes such as transposon regulation, heterochromatin formation, developmental gene regulation and genome stability.