In mammals, gene silencing by the RNA-induced silencing complex (RISC) is a well-understood cytoplasmic posttranscriptional gene regulatory mechanism. Here, we show that embryonic stem cells (ESCs) contain high levels of nuclear AGO proteins and that in ESCs nuclear AGO protein activity allows for the onset of differentiation. In the nucleus, AGO proteins interact with core RISC components, including the TNRC6 proteins and the CCR4-NOT deadenylase complex. In contrast to cytoplasmic miRNA-mediated gene silencing that mainly operates on cis-acting elements in mRNA 3' untranslated (UTR) sequences, in the nucleus AGO binding in the coding sequence and potentially introns also contributed to post-transcriptional gene silencing. Thus, nuclear localization of AGO proteins in specific cell types leads to a previously unappreciated expansion of the miRNA-regulated transcriptome.