Here, we report that the untreated rabbit reticulocyte lysate contains over 300 different endogenous microRNAs together with the major components of the RNA-induced silencing complex and thus can be used as a model in vitro system to study the effects of microRNAs on gene expression. By using this system, we were able to show that microRNA hybridization to its target resulted in a very rapid and strong inhibition of expression that was exerted exclusively at the level of translation initiation with no involvement of transcript degradation or deadenylation. Moreover, we demonstrate that the magnitude of microRNA-induced repression can only be recapitulated in the context of a competitive translating environment. By using a wide spectrum of competitor cellular and viral RNAs, we could further show that competition was not exerted at the level of general components of the translational machinery, but relied exclusively on the presence of the poly(A) tail with virtually no involvement of the cap structure.