Topoisomerases solve topological problems during DNA metabolism, but whether they participate in RNA metabolism remains unclear. Top3β represents a family of topoisomerases carrying activities for both DNA and RNA. Here we show that in Drosophila, Top3β interacts biochemically and genetically with the RNAi-induced silencing complex (RISC) containing AGO2, p68 RNA helicase, and FMRP. Top3β and RISC mutants are similarly defective in heterochromatin formation and transcriptional silencing by position-effect variegation assay. Moreover, both Top3β and AGO2 mutants exhibit reduced levels of heterochromatin protein HP1 in heterochromatin. Furthermore, expression of several genes and transposable elements in heterochromatin is increased in the Top3β mutant. Notably, Top3β mutants defective in either RNA binding or catalytic activity are deficient in promoting HP1 recruitment and silencing of transposable elements. Our data suggest that Top3β may act as an RNA topoisomerase in siRNA-guided heterochromatin formation and transcriptional silencing.