Recent advances have led to a more detailed understanding of RNA interference and its role in microRNA biogenesis and function. Primary microRNA transcripts are processed by the RNaseIII nuclease, Drosha, and are exported from the nucleus by Exportin-5. Dicer cleaves microRNAs into their mature forms, which can be incorporated into effector complexes that mediate gene silencing activities. The 3' two-nucleotide overhang structure, a signature of RNaseIII cleavage, has been identified as a critical specificity determinant in targeting and maintaining small RNAs in the RNA interference pathway. MicroRNA functional analyses and genetic and biochemical interrogation of components of the pathway are starting to provide a glimpse at the range of biological processes and phenomena regulated by RNA interference.