microRNAs (miRNAs) are generated from long primary (pri-) RNA polymerase II (Pol II)-derived transcripts by two RNase III processing reactions: Drosha cleavage of nuclear pri-miRNAs and Dicer cleavage of cytoplasmic pre-miRNAs. Here we show that Drosha cleavage occurs during transcription acting on both independently transcribed and intron-encoded miRNAs. We also show that both 5'-3' and 3'-5' exonucleases associate with the sites where co-transcriptional Drosha cleavage occurs, promoting intron degradation before splicing. We finally demonstrate that miRNAs can also derive from 3' flanking transcripts of Pol II genes. Our results demonstrate that multiple miRNA-containing transcripts are co-transcriptionally cleaved during their synthesis and suggest that exonucleolytic degradation from Drosha cleavage sites in pre-mRNAs may influence the splicing and maturation of numerous mRNAs.