MicroRNAs (miRNAs) and small interfering RNAs (siRNAs) are two types of noncoding RNAs involved in developmental regulation, genome maintenance, and defense in eukaryotes. The activity of Dicer or Dicer-like (DCL) proteins is required for the maturation of miRNAs and siRNAs. In this study, we cloned and sequenced 66 candidate rice (Oryza sativa) miRNAs out of 1,650 small RNA sequences (19 to approximately 25 nt), and they could be further grouped into 21 families, 12 of which are newly identified and three of which, OsmiR528, OsmiR529, and OsmiR530, have been confirmed by northern blot. To study the function of rice DCL proteins (OsDCLs) in the biogenesis of miRNAs and siRNAs, we searched genome databases and identified four OsDCLs. An RNA interference approach was applied to knock down two OsDCLs, OsDCL1 and OsDCL4, respectively. Strong loss of function of OsDCL1IR transformants that expressed inverted repeats of OsDCL1 resulted in developmental arrest at the seedling stage, and weak loss of function of OsDCL1IR transformants caused pleiotropic developmental defects. Moreover, all miRNAs tested were greatly reduced in OsDCL1IR but not OsDCL4IR transformants, indicating that OsDCL1 plays a critical role in miRNA processing in rice. In contrast, the production of siRNA from transgenic inverted repeats and endogenous CentO regions were not affected in either OsDCL1IR or OsDCL4IR transformants, suggesting that the production of miRNAs and siRNAs is via distinct OsDCLs.