The double-stranded RNA-binding protein Staufen has been implicated in various post-transcriptional gene regulatory processes. Here we demonstrate that the Caenorhabditis elegans homolog of Staufen, STAU-1, functionally interacts with microRNAs. Loss-of-function mutations of stau-1 significantly suppress phenotypes of let-7 family microRNA mutants, a hypomorphic allele of dicer and a lsy-6 microRNA partial loss-of-function mutant. Furthermore, STAU-1 modulates the activity of lin-14, a target of lin-4 and let-7 family microRNAs, and this modulation is abolished when the 3' untranslated region of lin-14 is removed. Deep sequencing of small RNA cDNA libraries reveals no dramatic change in the levels of microRNAs, or other small RNA populations between wild type and stau-1 mutant, with the exception of certain endogenous siRNAs in the WAGO pathway. The modulation of microRNA activity by STAU-1 does not seem to be associated with the previously reported enhanced exogenous RNAi (Eri) phenotype of stau-1 mutants since eri-1 exhibits the opposite effect on microRNA activity. Altogether, our results suggest that STAU-1 negatively modulates microRNA activity downstream of biogenesis, possibly by competing with microRNAs for binding on the 3' untranslated region of target mRNAs.