The recent discovery of a new class of 30-nucleotide long RNAs in mammalian testes, called PIWI-interacting RNA (piRNA), with similarities to microRNAs and repeat-associated small interfering RNAs (rasiRNAs), has raised puzzling questions regarding their biogenesis and function. We report a comparative analysis of currently available piRNA sequence data from the pachytene stage of mouse spermatogenesis that sheds light on their sequence diversity and mechanism of biogenesis. We conclude that (i) there are at least four times as many piRNAs in mouse testes than currently known; (ii) piRNAs, which originate from long precursor transcripts, are generated by quasi-random enzymatic processing that is guided by a weak sequence signature at the piRNA 5'ends resulting in a large number of distinct sequences; and (iii) many of the piRNA clusters contain inverted repeats segments capable of forming double-strand RNA fold-back segments that may initiate piRNA processing analogous to transposon silencing.