RNA interference (RNAi) is a eukaryotic gene-silencing system. Although the biochemistry of RNAi is relatively well defined, how this pathway is regulated remains incompletely understood. To identify genes involved in regulating the RNAi pathway, we screened for genetic mutations in Drosophila that alter the efficiency of RNAi. We identified the Drosophila homolog of the mammalian CR6-interacting factor 1 (CRIF1), also known as growth arrest and DNA-damage-inducible 45-gamma interacting protein (Gadd45GIP1), as a potential new regulator of the RNAi pathway. Loss-of-function mutants of Drosophila CRIF1 (dCRIF) are deficient in RNAi-mediated target gene knock-down, in the biogenesis of small interfering RNA (siRNA) molecules, and in antiviral immunity. Moreover, we show that dCRIF may function by interacting with, and stabilizing, the RNase III enzyme Dicer-2. Our results suggest that dCRIF may play an important role in regulating the RNAi pathway.