Small RNAs play essential regulatory roles in genome stability, development, and responses to biotic and abiotic stresses in most eukaryotes. In plants, the RNaseIII enzyme DICER-LIKE1 (DCL1) produces miRNAs, whereas DCL2, DCL3, and DCL4 produce various size classes of siRNAs. Plants also encode RNASE THREE-LIKE (RTL) enzymes that lack DCL-specific domains and whose function is largely unknown. We found that virus infection induces RTL1 expression, suggesting that this enzyme could play a role in plant–virus interaction. To first investigate the biochemical activity of RTL1 independent of virus infection, small RNAs were sequenced from transgenic plants constitutively expressing RTL1. These plants lacked almost all DCL2-, DCL3-, and DCL4-dependent small RNAs, indicating that RTL1 is a general suppressor of plant siRNA pathways. In vivo and in vitro assays revealed that RTL1 prevents siRNA production by cleaving dsRNA prior to DCL2-, DCL3-, and DCL4-processing. The substrate of RTL1 cleavage is likely long-perfect (or near-perfect) dsRNA, consistent with the RTL1-insensitivity of miRNAs, which derive from DCL1-processing of short-imperfect dsRNA. Virus infection induces RTL1 mRNA accumulation, but viral proteins that suppress RNA silencing inhibit RTL1 activity, suggesting that RTL1 has evolved as an inducible antiviral defense that could target dsRNA intermediates of viral replication, but that a broad range of viruses counteract RTL1 using the same protein toolbox used to inhibit antiviral RNA silencing. Together, these results reveal yet another level of complexity in the evolutionary battle between viruses and plant defenses.