MicroRNAs and small interfering RNAs (siRNAs) are two classes of small regulatory RNAs derived from different types of precursors and processed by distinct Dicer or Dicer-like (DCL) proteins. During evolution, four Arabidopsis thaliana DCLs and six rice (Oryza sativa) DCLs (Os DCLs) appear to have acquired specialized functions. The Arabidopsis DCLs are well characterized, but those in rice remain largely unstudied. Here, we show that both knockdown and loss of function of rice DCL4, the homolog of Arabidopsis DCL4, lead to vegetative growth abnormalities and severe developmental defects in spikelet identity. These phenotypic alterations appear to be distinct from those observed in Arabidopsis dcl4 mutants, which exhibit accelerated vegetative phase change. The difference in phenotype between rice and Arabidopsis dcl4 mutants suggests that siRNA processing by DCL4 has a broader role in rice development than in Arabidopsis. Biochemical and genetic analyses indicate that Os DCL4 is the major Dicer responsible for the 21-nucleotide siRNAs associated with inverted repeat transgenes and for trans-acting siRNA (ta-siRNA) from the endogenous TRANS-ACTING siRNA3 (TAS3) gene. We show that the biogenesis mechanism of TAS3 ta-siRNA is conserved but that putative direct targets of Os DCL4 appear to be differentially regulated between monocots and dicots. Our results reveal a critical role of Os DCL4-mediated ta-siRNA biogenesis in rice development.