Transposable elements (TEs) are a source of endogenous small RNAs in animals and plants. These TE-derived small RNAs have been traditionally treated as functionally distinct from gene-regulating small RNAs, such as miRNAs. Two recent reports in Drosophila and Arabidopsis have blurred the lines of this distinction. In both examples, epigenetically and developmentally regulated bursts in TE expression produce gene-regulating small RNAs. In the Drosophila early embryo, maternally deposited TE-derived PIWI-interacting small RNAs (piRNAs) play a role in regulating the nanos mRNA through small RNA binding sites in the nanos 3′ untranslated region (UTR). In Arabidopsis, when Athila retrotransposons are epigenetically activated, their transcripts are processed into small RNAs, which directly target the 3′UTR of the genic oligouridylate binding protein 1B (UBP1b) mRNA. Based on these two examples, we suggest that other TE-derived small RNAs regulate additional genes and propose that, through small RNAs, the epigenetic status of TEs could widely influence the genic transcriptome.