Dicer is an enzyme that cleaves double-stranded RNA (dsRNA) into 21–25-nt-long species involved in RNA-induced gene silencing. Researchers generated Dicer-null mouse embryonic stem (ES) cells using conditional gene targeting and found that these cells were viable but defective in RNA interference (RNAi) and microRNA (miRNA) production. The mutant ES cells showed severe defects in differentiation both in vitro and in vivo, with reduced epigenetic silencing of centromeric repeat sequences and homologous small dsRNAs. Re-expression of Dicer rescued these phenotypes, suggesting that Dicer is involved in multiple fundamental biological processes, including stem cell differentiation and centromeric heterochromatin structure maintenance. Dicer is essential for processing long dsRNA or miRNA precursors into mature RNA molecules. In various organisms, Dicer is involved in gene silencing at the transcriptional, post-transcriptional, or translational levels. In mammals, Dicer is required for miRNA production and RNAi. Inactivation of dicer-1 in mouse germ line leads to early embryonic lethality. In Schizosaccharomyces pombe, Dicer and the RNAi pathway are involved in generating heterochromatic small interfering RNAs (siRNAs) that mediate transcriptional gene silencing (TGS) of centromeric repeats. In Arabidopsis, Dicer-like proteins are involved in miRNA production and plant development. In Drosophila, Dicer is required for pre-miRNA processing and RNAi. Dcr-2 is involved in siRNA generation and is physically associated with the RNA-induced silencing complex (RISC). In Neurospora, Dicer is required for post-transcriptional gene silencing (PTGS), but DNA methylation does not depend on the RNAi pathway. RNA-guided DNA methylation was initially described in plants. Small dsRNAs can direct DNA methylation to homologous promoter regions. In mammals, RNAi does not result in DNA methylation of homologous endogenous sequences. In fission yeast, endogenous siRNAs corresponding to centromeric repeats have been isolated and are involved in TGS of centromeric repeats. Dicer-deficient ES cells were generated and analyzed. These cells were viable but failed to differentiate, with reduced expression of centromeric repeat sequences and homologous small dsRNAs. Re-expression of Dicer rescued these phenotypes. Dicer-deficient ES cells showed increased abundance of centromeric repeat transcripts and reduced DNA methylation and histone modifications. These results suggest that Dicer is required for proper heterochromatin formation in certain regions of the mammalian genome. Dicer-deficient ES cells could be rescued by re-expression of Dicer, indicating that the phenotypes observed were specific to Dicer-deficiency. Dicer is essential for development and stemDicer is an enzyme that cleaves double-stranded RNA (dsRNA) into 21–25-nt-long species involved in RNA-induced gene silencing. Researchers generated Dicer-null mouse embryonic stem (ES) cells using conditional gene targeting and found that these cells were viable but defective in RNA interference (RNAi) and microRNA (miRNA) production. The mutant ES cells showed severe defects in differentiation both in vitro and in vivo, with reduced epigenetic silencing of centromeric repeat sequences and homologous small dsRNAs. Re-expression of Dicer rescued these phenotypes, suggesting that Dicer is involved in multiple fundamental biological processes, including stem cell differentiation and centromeric heterochromatin structure maintenance. Dicer is essential for processing long dsRNA or miRNA precursors into mature RNA molecules. In various organisms, Dicer is involved in gene silencing at the transcriptional, post-transcriptional, or translational levels. In mammals, Dicer is required for miRNA production and RNAi. Inactivation of dicer-1 in mouse germ line leads to early embryonic lethality. In Schizosaccharomyces pombe, Dicer and the RNAi pathway are involved in generating heterochromatic small interfering RNAs (siRNAs) that mediate transcriptional gene silencing (TGS) of centromeric repeats. In Arabidopsis, Dicer-like proteins are involved in miRNA production and plant development. In Drosophila, Dicer is required for pre-miRNA processing and RNAi. Dcr-2 is involved in siRNA generation and is physically associated with the RNA-induced silencing complex (RISC). In Neurospora, Dicer is required for post-transcriptional gene silencing (PTGS), but DNA methylation does not depend on the RNAi pathway. RNA-guided DNA methylation was initially described in plants. Small dsRNAs can direct DNA methylation to homologous promoter regions. In mammals, RNAi does not result in DNA methylation of homologous endogenous sequences. In fission yeast, endogenous siRNAs corresponding to centromeric repeats have been isolated and are involved in TGS of centromeric repeats. Dicer-deficient ES cells were generated and analyzed. These cells were viable but failed to differentiate, with reduced expression of centromeric repeat sequences and homologous small dsRNAs. Re-expression of Dicer rescued these phenotypes. Dicer-deficient ES cells showed increased abundance of centromeric repeat transcripts and reduced DNA methylation and histone modifications. These results suggest that Dicer is required for proper heterochromatin formation in certain regions of the mammalian genome. Dicer-deficient ES cells could be rescued by re-expression of Dicer, indicating that the phenotypes observed were specific to Dicer-deficiency. Dicer is essential for development and stem