Piwi-interacting RNAs (piRNA) are small regulatory RNAs with essential roles in maintaining genome integrity in animals and protists. Most Caenorhabditis elegans piRNAs are transcribed from two genomic clusters that likely contain thousands of individual transcription units; however, their biogenesis is not understood. Here we identify and characterize prde-1 (piRNA silencing-defective) as the first essential C. elegans piRNA biogenesis gene. Analysis of prde-1 provides the first direct evidence that piRNA precursors are 28- to 29-nucleotide (nt) RNAs initiating 2 nt upstream of mature piRNAs. PRDE-1 is a nuclear germline-expressed protein that localizes to chromosome IV. PRDE-1 is required specifically for the production of piRNA precursors from genomic loci containing an 8-nt upstream motif, the Ruby motif. The expression of a second class of motif-independent piRNAs is unaffected in prde-1 mutants. We exploited this finding to determine the targets of the motif-independent class of piRNAs. Together, our data provide new insights into both the biogenesis and function of piRNAs in gene regulation.