microRNAs induce translational repression by binding to partially complementary sites on their target mRNAs. We have established an in vitro system that recapitulates translational repression mediated by the two Drosophila Argonaute (Ago) subfamily proteins, Ago1 and Ago2. We find that Ago1-RISC (RNA-induced silencing complex) represses translation primarily by ATP-dependent shortening of the poly(A) tail of its mRNA targets. Ago1-RISC can also secondarily block a step after cap recognition. In contrast, Ago2-RISC competitively blocks the interaction of eIF4E with eIF4G and inhibits the cap function. Our finding that the two Ago proteins in flies regulate translation by different mechanisms may reconcile previous, contradictory explanations for how miRNAs repress protein synthesis.