Among the set of Argonautes proteins encoded by metazoan genomes, some have conserved amino acids important for catalytic or slicing activity. The functional significance of these residues in microRNA (miRNA)-specific Argonautes in animals is still unclear since miRNAs do not induce site-specific cleavage of targeted messenger RNAs (mRNAs), unlike small interfering RNAs (siRNAs). Here, we report that miRNA-specific ALG-1 and ALG-2 Argonautes from Caenorhabditis elegans possess the slicing activity normally implicated in the siRNA-silencing pathway. We also find that ALG-1/2 can bind and use a Dicer-processed miRNA duplex to target mRNAs, suggesting an ability to displace RNA strands. Importantly, the slicing activity of ALG-1 or ALG-2 is essential for the miRNA pathway in vivo, as shown by the accumulation of truncated miRNA precursors and altered miRNA-induced silencing complex (miRISC) formation. Taken together, our data demonstrate that the slicing activity of Argonautes contributes to a new and unexpected step in the canonical miRNA pathway that occurs prior to miRISC loading in animals.