MicroRNAs (miRs) inhibit protein synthesis by mechanisms that are as yet unresolved. We developed a cell-free system from Drosophila melanogaster embryos that faithfully recapitulates miR2-mediated translational control by means of the 3' untranslated region of the D. melanogaster reaper messenger RNA. Here we show that miR2 inhibits translation initiation without affecting mRNA stability. Surprisingly, miR2 induces the formation of dense (heavier than 80S) miRNPs ('pseudo-polysomes') even when polyribosome formation and 60S ribosomal subunit joining are blocked. An mRNA bearing an ApppG instead of an m7GpppG cap structure escapes the miR2-mediated translational block. These results directly show the inhibition of m7GpppG cap-mediated translation initiation as the mechanism of miR2 function, and uncover pseudo-polysomal messenger ribonucleoprotein assemblies that may help to explain earlier findings.