Although many long non-coding RNAs (lncRNAs) have been discovered, their function and their association with RNAi factors in the nucleus have remained obscure. Here, we identify RNA transcripts that overlap the cyclooxygenase-2 (COX-2) promoter and contain two adjacent binding sites for an endogenous miRNA, miR-589. We find that miR-589 binds the promoter RNA and activates COX-2 transcription. In addition to miR-589, fully complementary duplex RNAs that target the COX-2 promoter transcript activate COX-2 transcription. Activation by small RNA requires RNAi factors argonaute-2 (AGO2) and GW182, but does not require AGO2-mediated cleavage of the promoter RNA. Instead, the promoter RNA functions as a scaffold. Binding of AGO2 protein/small RNA complexes to the promoter RNA triggers gene activation. Gene looping allows interactions between the promoters of COX-2 and phospholipase A2 (PLA2G4A), an adjacent pro-inflammatory pathway gene that produces arachidonic acid, the substrate for COX-2 protein. miR-589 and fully complementary small RNAs regulate both COX-2 and PLA2G4A gene expression, revealing an unexpected connection between key steps of the eicosanoid signaling pathway. The work demonstrates the potential for RNA to coordinate locus-dependent assembly of related genes to form functional operons through cis-looping.