Transposons and other selfish DNA elements can be found in all phyla, and mobilization of these elements can compromise genome integrity. The piRNA (PIWI-interacting RNA) pathway silences transposons in the germline, but it is unclear if this pathway has additional functions during development. Here we show that mutations in the Drosophila piRNA pathway genes, armi, aub, ago3, and rhi, lead to extensive fragmentation of the zygotic genome during the cleavage stage of embryonic divisions. Additionally, aub and armi show defects in telomere resolution during meiosis and the cleavage divisions; and mutations in lig-IV, which disrupt non-homologous end joining, suppress these fusions. By contrast, lig-IV mutations enhance chromosome fragmentation. Chromatin immunoprecipitation studies show that aub and armi mutations disrupt telomere binding of HOAP, which is a component of the telomere protection complex, and reduce expression of a subpopulation of 19- to 22-nt telomere-specific piRNAs. Mutations in rhi and ago3, by contrast, do not block HOAP binding or production of these piRNAs. These findings uncover genetically separable functions for the Drosophila piRNA pathway. The aub, armi, rhi, and ago3 genes silence transposons and maintain chromosome integrity during cleavage-stage embryonic divisions. However, the aub and armi genes have an additional function in assembly of the telomere protection complex.