Long arrays of simple, tandemly repeated DNA sequences (known as satellites) are enriched in centromeres 1 and pericentromeric regions 2 , and contribute to chromosome segregation and other heterochromatin functions 3,4 . Surprisingly, satellite DNAs are expressed in many multicellular eukaryotes, and their aberrant transcription may contribute to carcinogenesis and cellular toxicity 5-7 . Satellite transcription and/or RNAs may also promote centromere and heterochromatin activities 8-12 . However, we lack direct evidence that satellite DNA transcripts are required for normal cell or organismal functions. Here, we show that satellite RNAs derived from AAGAG tandem repeats are transcribed in many cell types throughout Drosophila melanogaster development, enriched in neuronal tissues and testes, localized within heterochromatic regions, and important for viability. Strikingly, we find that AAGAG transcripts are necessary for male fertility and are specifically required for normal histone-protamine exchange and sperm chromatin organization. Since AAGAG RNA-dependent events happen late in spermatogenesis when the transcripts are not detected, we speculate that AAGAG RNA functions in primary spermatocytes to 'prime' post-meiosis steps in sperm maturation. In addition to demonstrating specific essential functions for AAGAG RNAs, comparisons between closely related Drosophila species suggest that satellite repeats and their transcription evolve quickly to generate new functions.