Sm and Sm-like proteins are core components of the splicesome but have other functions distinct from pre-mRNA processing. Here, we show that Sm proteins also regulate germ cell specification during early C. elegans embryogenesis. SmE and SmG were required to maintain transcriptional quiescence in embryonic germ cell precursors. In addition, depletion of SmE inhibited expression of the germ lineage-specific proteins PIE-1, GLD-1, and NOS-2, but did not affect maintenance of several maternal mRNAs. PIE-1 had previously been shown to activate transcriptional silencing and NOS-2 expression. We found that PIE-1 also promotes GLD-1 expression by a process that is independent of transcriptional silencing. Thus, Sm proteins could control transcriptional silencing and maternal protein expression by regulating PIE-1. However, loss of SmE function also caused defects in P granule localization and premature division in early germline blastomeres, processes that are independent of PIE-1 function. Therefore, the Sm proteins control multiple aspects of germ cell precursor development. Because depletion of several other core splicing factors did not affect these events, these Sm functions are likely distinct from pre-mRNA splicing. Sm family proteins assemble into ribonucleoprotein complexes (RNPs) that control RNA activities. We suggest that novel Sm RNPs directly or indirectly influence posttranscriptional control of maternal mRNAs to promote germ cell specification in the early C. elegans embryo.