Drosophila Polycomb group (PcG) proteins silence homeotic genes through binding to Polycomb group response elements (PREs). Fab-7 is a PRE-containing regulatory element from the homeotic gene Abdominal-B. When present in multiple copies in the genome, Fab-7 can induce long-distance gene contacts that enhance PcG-dependent silencing. We show here that components of the RNA interference (RNAi) machinery are involved in PcG-mediated silencing at Fab-7 and in the production of small RNAs at transgenic Fab-7 copies. In general, these mutations do not affect the recruitment of PcG components, but they are specifically required for the maintenance of long-range contacts between Fab-7 copies. Dicer-2, PIWI, and Argonaute1, three RNAi components, frequently colocalize with PcG bodies, and their mutation significantly reduces the frequency of PcG-dependent chromosomal associations of endogenous homeotic genes. This suggests a novel role for the RNAi machinery in regulating the nuclear organization of PcG chromatin targets.