MicroRNAs (miRNAs) and small interfering RNAs (siRNAs) are abundant endogenous small RNAs (smRNAs) that control transcript expression through posttranscriptional gene silencing. Here, we show that concomitant loss of XRN4/EIN5, a 5'-3' exoribonuclease, and ABH1/CBP80, a subunit of the mRNA cap binding complex, results in Arabidopsis plants manifesting myriad developmental defects. We find that ABH1/CBP80 is necessary to obtain proper mature miRNA levels, which suggests this protein affects the miRNA-mediated RNA silencing pathway. Additionally, we show that XRN4/EIN5 affects the levels of a smRNA class that is processed from both sense and antisense strands of approximately 130 endogenous transcripts that apparently are converted to double-stranded RNA (dsRNA) and subsequently processed. We find that the parent transcripts of these smRNAs accumulate in an uncapped form upon loss of XRN4/EIN5, which suggests that uncapped endogenous transcripts can become smRNA biogenesis substrates. Overall, our results reveal unexpected connections between RNA metabolism and silencing pathways.