Post-transcriptional gene silencing by RNA-mediated interference (RNAi) is well documented, but the role of RNAi components in transcriptional control in metazoans has remained elusive. Orlando and colleagues now show that RNAi components Dicer 2 (DRC2) and Argonaute 2 (AGO2) from Drosophila melanogaster associate with chromatin, with a strong preference for transcriptionally active, euchromatic loci, including the heat-shock gene Hsp70. Knockdown of either DRC2 or AGO2 resulted in a significant increase in Hsp70 transcripts in cells that were not heat shocked. Chromatin immunoprecipitation (ChIP) analysis of DCR2-depleted cells indicated decreased promoter-proximal pausing of RNA polymerase II (Pol II) on Hsp70 and decreased levels of NELF-E protein, which is part of the regulatory complex that causes Pol II pausing. These effects might be explained by the observed associations of DCR2 and AGO2 with Pol II and NELF-E. During heat shock, elongating Pol II undergoes dynamic repositioning from euchromatic regions to heat-shock loci. Relocation of Pol II was repressed in Ago2 or Dcr2 null mutant chromosomes, suggesting that AGO2 and DCR2 are required for global transcriptional repression after heat shock. Deep sequencing of AGO2-associated small RNAs revealed strong enrichment for small RNAs that encompass the promoters as well as other regions of heat-shock loci and of most active genetic loci on both strands, but with a strong bias for the antisense strand, specifically after heat shock. Although the precise nuclear RNAi pathway in flies remains to be determined, the current data suggest that crucial RNAi components can contribute to transcriptional control by influencing the processivity of Pol II, thus revealing another level of transcriptome control. (Nature doi:10.1038/nature10492, published online 6 November 2011)