The complexity of the eukaryotic transcriptome is generated by the interplay of transcription initiation, termination, alternative splicing, and other forms of post-transcriptional modification. It was recently shown that RNA transcripts may also undergo cleavage and secondary 59 capping. Here, we show that post-transcriptional cleavage of RNA contributes to the diversification of the transcriptome by generating a range of small RNAs and long coding and noncoding RNAs. Using genomewide histone modification and RNA polymerase II occupancy data, we confirm that the vast majority of intraexonic CAGE tags are derived from post-transcriptional processing. By comparing exonic CAGE tags to tissue-matched PARE data, we show that the cleavage and subsequent secondary capping is regulated in a developmental-stage-and tissue-specific manner. Furthermore, we find evidence of prevalent RNA cleavage in numerous transcriptomic data sets, including SAGE, cDNA, small RNA libraries, and deep-sequenced size-fractionated pools of RNA. These cleavage products include mRNA variants that retain the potential to be translated into shortened functional protein isoforms. We conclude that post-transcriptional RNA cleavage is a key mechanism that expands the functional repertoire and scope for regulatory control of the eukaryotic transcriptome.