Endogenous small RNAs (endo-siRNAs) interact with Argonaute (AGO) proteins to mediate sequence-specific regulation of diverse biological processes. Here, we combine deep-sequencing and genetic approaches to explore the biogenesis and function of endo-siRNAs in C. elegans. We describe conditional alleles of the dicer-related helicase, drh-3, that abrogate both RNA interference and the biogenesis of endo-siRNAs, called 22G-RNAs. DRH-3 is a core component of RNA-dependent RNA polymerase (RdRP) complexes essential for several distinct 22G-RNA systems. We show that in the germ-line, one system is dependent on worm-specific AGOs, including WAGO-1, which localizes to germ-line nuage structures called P-granules. WAGO-1 silences certain genes, transposons, pseudogenes and cryptic loci. Finally, we demonstrate that components of the nonsense-mediated decay pathway function in at least one WAGO-mediated surveillance pathway. These findings broaden our understanding of the biogenesis and diversity of 22G-RNAs and suggest novel regulatory functions for small RNAs. Overall design: Total RNA was extracted from C. elegans drh-3(ne4253) and wild type animals