A hallmark of mammalian embryonic development is the widespread induction of microRNA (miRNA) expression. Surprisingly, the transcription of many of these small, noncoding RNAs is unchanged through development; rather, a post-transcriptional regulatory event prevents accumulation of the mature miRNA species. Here, we present a biochemical framework for the regulated production of the Let-7 family of miRNAs. Embryonic cells contain a Drosha Inhibitor that prevents processing of the Let-7 primary transcript. This inhibitor specifically binds to conserved nucleotides in the loop region of the Let-7 precursor, and competitor RNAs that mimic the binding site restore Let-7 processing. We have identified the Drosha Inhibitor as the embryonic stem cell specific protein Lin-28. Lin-28 has been previously implicated in developmental regulatory pathways in Caenorhabditis elegans, and it promotes reprogramming of human somatic cells into pluripotent stem cells. Our findings outline a microRNA post-transcriptional regulatory network and establish a novel role for the miRNA precursor loop in the regulated production of mature Let-7.