As a champion of small RNA research for two decades, Caenorhabditis elegans has revealed the essential Argonaute CSR-1 to play key nuclear roles in modulating chromatin, chromosome segregation and germline gene expression via 22G-small RNAs. Despite CSR-1 being preserved among diverse nematodes, the conservation and divergence in function of the targets of small RNA pathways remains poorly resolved. Here we apply comparative functional genomic analysis between C. elegans and Caenorhabditis briggsae to characterize the CSR-1 pathway, its targets and their evolution. C. briggsae CSR-1-associated small RNAs that we identified by immunoprecipitation-small RNA sequencing overlap with 22G-RNAs depleted in cbr-csr-1 RNAi-treated worms. By comparing 22G-RNAs and target genes between species, we defined a set of CSR-1 target genes with conserved germline expression, enrichment in operons and more slowly evolving coding sequences than other genes, along with a small group of evolutionarily labile targets. We demonstrate that the association of CSR-1 with chromatin is preserved, and show that depletion of cbr-csr-1 leads to chromosome segregation defects and embryonic lethality. This first comparative characterization of a small RNA pathway in Caenorhabditis establishes a conserved nuclear role for CSR-1 and highlights its key role in germline gene regulation across multiple animal species.