Double-stranded RNA has been shown to induce gene silencing in diverse eukaryotes and by a variety of pathways. We have examined the taxonomic distribution and the phylogenetic relationship of key components of the RNA interference (RNAi) machinery in members of five eukaryotic supergroups. On the basis of the parsimony principle, our analyses suggest that a relatively complex RNAi machinery was already present in the last common ancestor of eukaryotes and consisted, at a minimum, of one Argonaute-like polypeptide, one Piwi-like protein, one Dicer, and one RNA-dependent RNA polymerase. As proposed before, the ancestral (but non-essential) role of these components may have been in defense responses against genomic parasites such as transposable elements and viruses. From a mechanistic perspective, the RNAi machinery in the eukaryotic ancestor may have been capable of both small-RNA-guided transcript degradation as well as transcriptional repression, most likely through histone modifications. Both roles appear to be widespread among living eukaryotes and this diversification of function could account for the evolutionary conservation of duplicated Argonaute-Piwi proteins. In contrast, additional RNAi-mediated pathways such as RNA-directed DNA methylation, programmed genome rearrangements, meiotic silencing by unpaired DNA, and miRNA-mediated gene regulation may have evolved independently in specific lineages.