The production of aberrant RNA (aRNA) is the initial step in several RNAi pathways. How aRNA is produced and specifically recognized by RNA-dependent RNA polymerases (RdRPs) to generate double-stranded RNA (dsRNA) is not clear. We previously showed that in the filamentous fungus Neurospora, the RdRP QDE-1 is required for rDNA-specific aRNA production, suggesting that QDE-1 may be important in aRNA synthesis. Here we show that a recombinant QDE-1 is both an RdRP and a DNA-dependent RNA polymerase (DdRP). Its DdRP activity is much more robust than the RdRP activity and occurs on ssDNA but not dsDNA templates. We further show that Replication Protein A (RPA), a single-stranded DNA-binding complex that interacts with QDE-1, is essential for aRNA production and gene silencing. In vitro reconstitution assays demonstrate that QDE-1 can produce dsRNA from ssDNA, a process that is strongly promoted by RPA. Furthermore, the interaction between QDE-1 and RPA requires the RecQ DNA helicase QDE-3, a homolog of the human Werner/Bloom Syndrome proteins. Together, these results suggest a novel small RNA biogenesis pathway in Neurospora and a new mechanism for the production of aRNA and dsRNA in RNAi pathways.