Dicer is an RNase III-family nuclease that initiates RNA interference (RNAi) and related phenomena by generation of the small RNAs that determine the specificity of these gene silencing pathways. We have previously shown that Dicer is essential for mammalian development, with Dicer-deficient mice dying at embryonic day 7.5 with a lack of detectable multipotent stem cells. To permit a more detailed investigation of the biological roles of Dicer, we have generated embryonic stem cell lines in which their single Dicer gene can be conditionally inactivated. As expected, Dicer loss compromises maturation of microRNAs and leads to a defect in gene silencing triggered by long dsRNAs. However, the absence of Dicer does not affect the ability of small interfering RNAs to repress gene expression. Of interest, Dicer loss does compromise the proliferation of ES cells, possibly rationalizing the phenotype previously observed in Dicer-null animals. Dicer loss also affects the abundance of transcripts from mammalian centromeres but does so without a pronounced affect on histone modification status at pericentric repeats or methylation of centromeric DNA. These studies provide a conditional model of RNAi deficiency in mammals that will permit the dissection of the biological roles of the RNAi machinery in cultured mammalian cells.