ARGONAUTE (AGO) RNA-binding proteins are involved in RNA silencing. They bind to short interfering RNAs (siRNAs) and microRNAs (miRNAs) through a conserved PAZ domain, and, in animals, they assemble into a multisubunit RNA-induced silencing complex (RISC). The mammalian AGO2, termed Slicer, directs siRNA- and miRNA-mediated cleavage of a target RNA. In Arabidopsis, there are 10 members of the AGO family, and the AGO1 protein is potentially the Slicer component in different RNA-silencing pathways. Here, we show that AGO1 selectively recruits certain classes of short silencing-related RNA. AGO1 is physically associated with miRNAs, transacting siRNAs, and transgene-derived siRNAs but excludes virus-derived siRNAs and 24-nt siRNAs involved in chromatin silencing. We also show that AGO1 has Slicer activity. It mediates the in vitro cleavage of a mir165 target RNA in a manner that depends on the sequence identity of amino acid residues in the PIWI domain that are predicted by homology with animal Slicer-competent AGO proteins to constitute the RNase catalytic center. However, unlike animals, we find no evidence that AGO1 Slicer is in a high molecular weight RNA-induced silencing complex. The Slicer activity fractionates as a complex of approximately 150 kDa that likely constitutes the AGO1 protein and associated RNA without any other proteins. Based on sequence similarity, we predict that other Arabidopsis AGOs might have a similar catalytic activity but recruit different subsets of siRNAs or miRNAs.