We use native gel electrophoresis to characterize complexes that mediate RNA interference (RNAi) in Drosophila. Our data reveal three distinct complexes (R1, R2, and R3) that assemble on short interfering RNAs (siRNAs) in vitro. To form, all three complexes require Dicer-2 (Dcr-2), which directly contacts siRNAs in the ATP-independent R1 complex. R1 serves as a precursor to both the R2 and R3 complexes. R3 is a large (80S), ATP-enhanced complex that contains unwound siRNAs, cofractionates with known RNAi factors, and binds and cleaves targeted mRNAs in a cognate-siRNA-dependent manner. Our results establish an ordered biochemical pathway for RISC assembly and indicate that siRNAs must first interact with Dcr-2 to reach the R3 "holo-RISC" complex. Dcr-2 does not simply transfer siRNAs to a distinct effector complex, but rather assembles into RISC along with the siRNAs, indicating that its role extends beyond the initiation phase of RNAi.