Tandem repeat sequences are frequently associated with gene silencing phenomena. The Arabidopsis thaliana FWA gene contains two tandem repeats and is an efficient target for RNA-directed de novo DNA methylation when it is transformed into plants. We showed that the FWA tandem repeats are necessary and sufficient for de novo DNA methylation and that repeated character rather than intrinsic sequence is likely important. Endogenous FWA can adopt either of two stable epigenetic states: methylated and silenced or unmethylated and active. Surprisingly, we found small interfering RNAs (siRNAs) associated with FWA in both states. Despite this, only the methylated form of endogenous FWA could recruit further RNA-directed DNA methylation or cause efficient de novo methylation of transgenic FWA. This suggests that RNA-directed DNA methylation occurs in two steps: first, the initial recruitment of the siRNA-producing machinery, and second, siRNA-directed DNA methylation either in cis or in trans. The efficiency of this second step varies depending on the nature of the siRNA-producing locus, and at some loci, it may require pre-existing chromatin modifications such as DNA methylation itself. Enhancement of RNA-directed DNA methylation by pre-existing DNA methylation could create a self-reinforcing system to enhance the stability of silencing. Tandem repeats throughout the Arabidopsis genome produce siRNAs, suggesting that repeat acquisition may be a general mechanism for the evolution of gene silencing.