MicroRNAs (miRNAs) interact with target sites located in the 3' untranslated regions (3' UTRs) of mRNAs to downregulate their expression when the appropriate miRNA is bound to target mRNA. To establish the functional importance of target-site localization in the 3' UTR, we modified the stop codon to extend the coding region of the transgene reporter through the miRNA target sequence. As a result, the miRNAs lost their ability to inhibit translation but retained their ability to function as small interfering RNAs in mammalian cells in culture and in vivo. The addition of rare but not optimal codons upstream of the extended opening reading frame (ORF) made the miRNA target site more accessible and restored miRNA-induced translational knockdown. Taken together, these results suggest that active translation impedes miRNA-programmed RISC association with target mRNAs and support a mechanistic explanation for the localization of most miRNA target sites in noncoding regions of mRNAs in mammals.