RNA interference is implemented through the action of the RNA-induced silencing complex (RISC). Although Argonaute2 has been identified as the catalytic center of RISC, the RISC polypeptide composition and assembly using short interfering RNA (siRNA) duplexes has remained elusive. Here we show that RISC is composed of Dicer, the double-stranded RNA binding protein TRBP, and Argonaute2. We demonstrate that this complex can cleave target RNA using precursor microRNA (pre-miRNA) hairpin as the source of siRNA. Although RISC can also utilize duplex siRNA, it displays a nearly 10-fold greater activity using the pre-miRNA Dicer substrate. RISC distinguishes the guide strand of the siRNA from the passenger strand and specifically incorporates the guide strand. Importantly, ATP is not required for miRNA processing, RISC assembly, or multiple rounds of target-RNA cleavage. These results define the composition of RISC and demonstrate that miRNA processing and target-RNA cleavage are coupled.