The enzyme Dicer is central to the production of small silencing RNAs such as microRNAs (miRNAs) and small interfering RNAs (siRNAs). Like other insects, Drosophila melanogaster uses different Dicers to make siRNAs and miRNAs: Dicer-1 produces miRNAs from pre-miRNAs, whereas Dicer-2 generates siRNAs from long double-stranded RNA (dsRNA). How do the 2 Dicers achieve their substrate specificity? Here, we review recent findings that inorganic phosphate restricts the substrate specificity of Dicer-2 to long dsRNA. Inorganic phosphate inhibits Dicer-2 from binding and cleaving pre-miRNAs, without affecting the processing of long dsRNA. Crystal structures of a fragment of human Dicer in complex with an RNA duplex identify a phosphate-binding pocket that recognizes both the 5'-monophosphate of a substrate RNA and inorganic phosphate. We propose that inorganic phosphate occupies the phosphate-binding pocket in the fly Dicer-2, blocking binding of pre-miRNA and restricting pre-miRNA processing to Dicer-1. Thus, a small molecule can alter the substrate specificity of a nucleic acid-processing enzyme.