Algae are a large group of aquatic, typically photosynthetic, eukaryotes that include species from very diverse phylogenetic lineages, from those similar to land plants to those related to protist parasites. The recent sequencing of several algal genomes has provided insights into the great complexity of these organisms. Genomic information has also emphasized our lack of knowledge of the functions of many predicted genes, as well as the gene regulatory mechanisms in algae. Core components of the machinery for RNA-mediated silencing show widespread distribution among algal lineages, but they also seem to have been lost entirely from several species with relatively small nuclear genomes. Complex sets of endogenous small RNAs, including candidate microRNAs and small interfering RNAs, have now been identified by high-throughput sequencing in green, red, and brown algae. However, the natural roles of RNA-mediated silencing in algal biology remain poorly understood. Limited evidence suggests that small RNAs may function, in different algae, in defense mechanisms against transposon mobilization, in responses to nutrient deprivation and, possibly, in the regulation of recently evolved developmental processes. From a practical perspective, RNA interference (RNAi) is becoming a promising tool for assessing gene function by sequence-specific knockdown. Transient gene silencing, triggered with exogenously synthesized nucleic acids, and/or stable gene repression, involving genome-integrated transgenes, have been achieved in green algae, diatoms, yellow-green algae, and euglenoids. The development of RNAi technology in conjunction with system level "omics" approaches may provide the tools needed to advance our understanding of algal physiological and metabolic processes.