Small RNAs targeted to gene promoters in human cells have been shown to modulate both transcriptional gene suppression and activation. However, the mechanism involved in transcriptional activation has remained poorly defined, and an endogenous RNA trigger for transcriptional gene silencing has yet to be identified. Described here is an explanation for siRNA-directed transcriptional gene activation, as well as a role for non-coding antisense RNAs as effector molecules driving transcriptional gene silencing. Transcriptional activation of p21 gene expression was determined to be the result of Argonaute 2-dependent, post-transcriptional silencing of a p21-specific antisense transcript, which functions in Argonaute 1-mediated transcriptional control of p21 mRNA expression. The data presented here suggest that in human cells, bidirectional transcription is an endogenous gene regulatory mechanism whereby an antisense RNA directs epigenetic regulatory complexes to a sense promoter, resulting in RNA-directed epigenetic gene regulation. The observations presented here support the notion that epigenetic silencing of tumor suppressor genes, such as p21, may be the result of an imbalance in bidirectional transcription levels. This imbalance allows the unchecked antisense RNA to direct silent state epigenetic marks to the sense promoter, resulting in stable transcriptional gene silencing.