In Drosophila ovarian germ cells, PIWI-interacting RNAs (piRNAs) direct Aubergine and Argonaute3 to cleave transposon transcripts and instruct Piwi to repress transposon transcription, thereby safeguarding the germline genome. Here, we report that RNA cleavage by Argonaute3 initiates production of most Piwi-bound piRNAs. We find that the cardinal function of Argonaute3, whose piRNA guides predominantly correspond to sense transposon sequences, is to produce antisense piRNAs that direct transcriptional silencing by Piwi, rather than to make piRNAs that guide post-transcriptional silencing by Aubergine. We also find that the Tudor domain protein Qin prevents Aubergine's cleavage products from becoming Piwi-bound piRNAs, ensuring that antisense piRNAs guide Piwi. Although Argonaute3 slicing is required to efficiently trigger phased piRNA production, an alternative, slicing-independent pathway suffices to generate Piwi-bound piRNAs that repress transcription of a subset of transposon families. This alternative pathway may help flies silence newly acquired transposons for which they lack extensively complementary piRNAs.