In Drosophila melanogaster, Dicer-2/R2D2 and Dicer-1 generate small interfering RNA (siRNA) and microRNA (miRNA), respectively. Here we identify a novel dsRNA-binding protein, which we named R3D1-L, that forms a stable complex with Dicer-1 in vitro and in vivo. While depletion of R3D1-L by RNAi causes accumulation of precursor miRNA (pre-miRNA) in S2 cells, recombinant R3D1-L enhances miRNA production by Dicer-1 in vitro. Furthermore, R3D1 deficiency causes miRNA-generating defect and severe sterility in male and female flies. Therefore, R3D1-L functions in concert with Dicer-1 in miRNA biogenesis and is required for reproductive development in Drosophila.