Double-stranded RNA (dsRNA) directs gene-specific, post-transcriptional silencing in many organisms, including vertebrates, and has provided a new tool for studying gene function. The biochemical mechanisms underlying this dsRNA interference (RNAi) are unknown. Here we report the development of a cell-free system from syncytial blastoderm Drosophila embryos that recapitulates many of the features of RNAi. The interference observed in this reaction is sequence specific, is promoted by dsRNA but not single-stranded RNA, functions by specific mRNA degradation, and requires a minimum length of dsRNA. Furthermore, preincubation of dsRNA potentiates its activity. These results demonstrate that RNAi can be mediated by sequence-specific processes in soluble reactions.