RISC, the RNA-induced silencing complex, uses short interfering RNAs (siRNAs) or micro RNAs (miRNAs) to select its targets in a sequence-dependent manner. Key RISC components are Argonaute proteins, which contain two characteristic domains, PAZ and PIWI. PAZ is highly conserved and is found only in Argonaute proteins and Dicer. We have solved the crystal structure of the PAZ domain of Drosophila Argonaute2. The PAZ domain contains a variant of the OB fold, a module that often binds single-stranded nucleic acids. PAZ domains show low-affinity nucleic acid binding, probably interacting with the 3' ends of single-stranded regions of RNA. PAZ can bind the characteristic two-base 3' overhangs of siRNAs, indicating that although PAZ may not be a primary nucleic acid binding site in Dicer or RISC, it may contribute to the specific and productive incorporation of siRNAs and miRNAs into the RNAi pathway.