Small silencing RNAs repress gene expression by a set of related mechanisms collectively called RNA-silencing pathways [1, 2]. In the RNA interference (RNAi) pathway [3], small interfering mRNA (siRNAs) defend cells from invasion by foreign nucleic acids, such as those produced by viruses. In contrast, microRNAs (miRNAs) sculpt endogenous mRNA expression [4]. A third class of small RNAs, Piwi-interacting RNAs (piRNAs), defends the genome from transposons [5-9]. Here, we report that Drosophila piRNAs contain a 2'-O-methyl group on their 3' termini; this is a modification previously reported for plant miRNAs and siRNAs [10] and mouse and rat piRNAs [11, 12, 13]. Plant small-RNA methylation is catalyzed by the protein HEN1 [10, 14, 15]. We find that DmHen1, the Drosophila homolog of HEN1, methylates the termini of siRNAs and piRNAs. Without DmHen1, the length and abundance of piRNAs are decreased, and piRNA function is perturbed. Unlike plant HEN1, DmHen1 acts on single strands, not duplexes, explaining how it can use as substrates both siRNAs-which derive from double-stranded precursors-and piRNAs-which do not [8, 13]. 2'-O-methylation of siRNAs may be the final step in assembly of the RNAi-enzyme complex, RISC, occurring after an Argonaute-bound siRNA duplex is converted to single-stranded RNA.