Small interfering RNAs (siRNAs) directed to gene promoters can silence genes at the transcriptional level. siRNA-directed transcriptional silencing (RdTS) was first described in plants and yeasts and more recently in mammalian cells. RdTS has been associated with the induction of epigenetic changes and the formation of complexes containing RNA interference and chromatin-remodelling factors. Here, we show that a promoter-targeted siRNA inhibits transcription of the c-myc gene. Transcriptional silencing of c-myc did not involve changes of known epigenetic marks. Instead, the c-myc promoter-targeted siRNA interfered with transcription initiation blocking the assembly of the pre-initiation complex. Transcriptional interference depended on Argonaute 2 and a noncoding promoter-associated RNA initiated upstream and overlapping the transcription start site. Silencing of c-myc led to growth arrest, reduced clonogenic potential and senescence of c-myc over-expressing prostate cancer cells with minimal effect on normal cells. RNA-directed transcriptional interference may be a natural mechanism of transcriptional control and siRNAs targeting noncoding RNAs participating in this regulatory pathway could be valuable tools to control expression of deregulated genes in human diseases.