Piwi-interacting RNAs (piRNAs) are small RNAs required to maintain germline integrity and fertility, but their mechanism of action is poorly understood. Here we demonstrate that Caenorhabditis elegans piRNAs silence transcripts in trans through imperfectly complementary sites. Target silencing is independent of Piwi endonuclease activity or "slicing." Instead, piRNAs initiate a localized secondary endogenous small interfering RNA (endo-siRNA) response. Endogenous protein-coding gene and transposon transcripts exhibit Piwi-dependent endo-siRNAs at sites complementary to piRNAs and are derepressed in Piwi mutants. Genomic loci of piRNA biogenesis are depleted of protein-coding genes and tend to overlap the start and end of transposons in sense and antisense, respectively. Our data suggest that nematode piRNA clusters are evolving to generate piRNAs against active mobile elements. Thus, piRNAs provide heritable, sequence-specific triggers for RNA interference in C. elegans.