ABSTRACTThe PIWI-interacting RNA (piRNA) pathway protects animal genome integrity in part through establishing repressive heterochromatin at transposon loci. Silencing requires piRNA-guided targeting of nuclear PIWI proteins to nascent transposon transcripts, yet the subsequent molecular events are not understood. Here, we identify SFiNX (Silencing Factor interacting Nuclear eXport variant), an interdependent protein complex required for Piwi-mediated co-transcriptional silencing in Drosophila. SFiNX consists of Nxf2-Nxt1, a gonad-specific variant of the heterodimeric mRNA export receptor Nxf1-Nxt1, and the Piwi-associated protein Panoramix. SFiNX mutant flies are sterile and exhibit transposon de-repression because piRNA-loaded Piwi is unable to establish heterochromatin. Within SFiNX, Panoramix recruits the heterochromatin effectors, while the RNA binding Nxf2 protein licenses co-transcriptional silencing. Our data reveal how Nxf2 evolved from an RNA transport receptor into a co-transcriptional silencing factor. Thus, NXF-variants, which are abundant in metazoans, can have diverse molecular functions and might have been co-opted for host genome defense more broadly.