Now that the sequencing of many genomes has been completed, the basic challenges are finding the genes and predicting their functions. Up until now, a large information gap has existed between the knowledge of genome sequence and our knowledge of protein function. The assessment of gene function may be performed using the tools of reverse genetics, including knock-out mice, antisense oligomers, aptamers, and ribozymes. These approaches have been superseded by RNA interference (RNAi), which exhibits much more potency for the investigation of protein function than the techniques listed above. As already known some years ago, RNAi is based on an ancient anti-viral defense mechanism in lower eukaryotes. It is induced by double-stranded RNA and its processing to 21-23 nt small interfering RNAs (siRNAs), which cause the degradation of homologous endogenous mRNA. The way RNAi works has still to be determined, but it already serves as a first-choice approach to generate loss-of-function phenotypes among a broad variety of eukaryotic species, such as nematodes, flies, plants, fungi and mammals. RNAi also represents an extremely powerful tool, becoming a therapeutic approach to curing infectious diseases originated by viral or parasitic invasion. In this review we present the current view of how RNAi works in different eukaryotic species and its high potential for functional genomics and in rational drug design.