Dicer processes long double-stranded RNA (dsRNA) and pre-microRNAs to generate the functional intermediates (short interfering RNAs and microRNAs) of the RNA interference pathway. Here we identify features of RNA structure that affect Dicer specificity and efficiency. The data presented show that various attributes of the 3′ end structure, including overhang length and sequence composition, play a primary role in determining the position of Dicer cleavage in both dsRNA and unimolecular, short hairpin RNA (shRNA). We also demonstrate that siRNA end structure affects overall silencing functionality. Awareness of these new features of Dicer cleavage specificity as it is related to siRNA functionality provides a more detailed understanding of the RNAi mechanism and can shape the development of hairpins with enhanced functionality.