Argonaute/small RNA pathways and heterochromatin work together to propagate transgenerational gene silencing, but the mechanisms behind their interaction are not well understood. Here, we show that induction of heterochromatin silencing in C. elegans by RNAi or by artificially tethering pathway components to target RNA causes co-localization of target alleles in pachytene nuclei. Tethering the nuclear Argonaute WAGO-9/HRDE-1 induces heterochromatin formation and independently induces small RNA amplification. Consistent with this finding, HRDE-1, while predominantly nuclear, also localizes to peri-nuclear nuage domains, where amplification is thought to occur. Tethering a heterochromatin-silencing factor, NRDE-2, induces heterochromatin formation, which subsequently causes de novo synthesis of HRDE-1 guide RNAs. HRDE-1 then acts to further amplify small RNAs that load on downstream Argonautes. These findings suggest that HRDE-1 plays a dual role, acting upstream to initiate heterochromatin silencing and downstream to stimulate a new cycle of small RNA amplification, thus establishing a self-enforcing mechanism that propagates gene silencing to future generations.