Diverse naturally-occurring small RNA species interact with Argonaute proteins to mediate sequence-specific regulation in animals. In addition to micro-RNAs (miRNAs), which collectively regulate thousands of target mRNAs, other endogenous small RNA species include the Piwi-associated piRNAs that are important for fertility and a less well-characterized class of small RNAs often referred to simply as endo-siRNAs. Here we have utilized deep-sequencing technology and C. elegans genetics to explore the biogenesis and function of endo-siRNAs. We describe conditional alleles of the dicer-related helicase, drh-3, that implicate DRH-3 in both the response to foreign dsRNA as well as the RNA-dependent RNA Polymerase (RdRP)-dependent biogenesis of a diverse class of endogenous small RNAs, termed 22G-RNAs. We show that 22G-RNAs are abundantly expressed in the germline and maternally inherited and are the products of at least two distinct 22G-RNA systems. One system is dependent on worm-specific AGOs, including WAGO-1, which localizes to germline nuage-related structures termed P-granules. The WAGO 22G-RNA system silences transposons, pseudogenes and cryptic loci as well as a number of genes. Finally, we demonstrate that components of the nonsense-mediated decay pathway function in at least one of the multiple, distinct WAGO surveillance pathways. These findings broaden our understanding of the biogenesis and diversity of 22G-RNA species and suggest potential novel regulatory functions for these small RNAs. Overall design: 18 samples examined. Small RNA libraries generated from: C. elegans animals with mutations in the WAGO pathway and a WAGO-1 immunopercipitate.