Small RNAs have been implicated in numerous cellular processes, including effects on chromatin structure and the repression of transposons. We describe the generation of a small RNA response at DNA ends in Drosophila that is analogous to the recently reported double-strand break (DSB)-induced RNAs or Dicer- and Drosha-dependent small RNAs in Arabidopsis and vertebrates. Active transcription in the vicinity of the break amplifies this small RNA response, demonstrating that the normal messenger RNA contributes to the endogenous small interfering RNAs precursor. The double-stranded RNA precursor forms with an antisense transcript that initiates at the DNA break. Breaks are thus sites of transcription initiation, a novel aspect of the cellular DSB response. This response is specific to a double-strand break since nicked DNA structures do not trigger small RNA production. The small RNAs are generated independently of the exact end structure (blunt, 3'- or 5'-overhang), can repress homologous sequences in trans and may therefore--in addition to putative roles in repair--exert a quality control function by clearing potentially truncated messages from genes in the vicinity of the break.