Small regulatory RNAs guide Argonaute (Ago) proteins in a sequence-specific manner to their targets and thereby play important roles in eukaryotic gene silencing1. Of the three small RNA classes, microRNAs and siRNAs are processed from double-stranded precursors into defined 21- to 23-mers by Dicer, an endoribonuclease with intrinsic ruler function. piRNAs—the 22-30 nt long guides for PIWI-clade Ago proteins that silence transposons in animal gonads—are generated Dicer-independently from single-stranded precursors2,3. piRNA 5' ends are defined either by Zucchini, a mitochondria-anchored endonuclease4,5, or by piRNA-guided target cleavage6,7. Formation of piRNA 3' ends is poorly understood. Here, we find that two genetically and mechanistically distinct pathways generate piRNA 3' ends in Drosophila. The initiating nucleases are either Zucchini or the PIWI-clade proteins Aubergine (Aub)/Ago3. While Zucchini-mediated cleavages directly define mature piRNA 3' ends8,9, Aub/Ago3-mediated cleavages liberate pre-piRNAs that require extensive resection by the 3'-to-5' exoribonuclease Nibbler/Mut-710–13. The relative activity of these two pathways dictates the extent to which piRNAs are fueled into cytoplasmic or nuclear PIWI-clade proteins and thereby sets the balance between post-transcriptional and transcriptional silencing. Strikingly, loss of both Zucchini and Nibbler reveals a minimal, Argonaute-driven small RNA biogenesis pathway where piRNA 5' and 3' ends are directly produced by closely spaced Aub/Ago3-mediated cleavage events. Our data establish a coherent blueprint for piRNA biogenesis, and set the stage for the mechanistic dissection of the processes that govern piRNA 3' end formation.