Deep sequencing studies frequently identify small RNA fragments of abundant RNAs. These fragments are thought to represent degradation products of their precursors. Using sequencing, computational analysis, and sensitive northern blot assays, we show that constitutively expressed non-coding RNAs such as tRNAs, snoRNAs, rRNAs and snRNAs preferentially produce small 5' and 3' end fragments. Similar to that of microRNA processing, these terminal fragments are generated in an asymmetric manner that predominantly favors either the 5' or 3' end. Terminal-specific and asymmetric processing of these small RNAs occurs in both mouse and human cells. In addition to the known processing of some 3' terminal tRNA-derived fragments (tRFs) by the RNase III endonuclease Dicer, we show that several RNase family members can produce tRFs, including Angiogenin that cleaves the TψC loop to generate 3' tRFs. The 3' terminal tRFs but not the 5' tRFs are highly complementary to human endogenous retroviral sequences in the genome. Despite their independence from Dicer processing, these tRFs associate with Ago2 and are capable of down regulating target genes by transcript cleavage in vitro. We suggest that endogenous 3' tRFs have a role in regulating the unwarranted expression of endogenous viruses through the RNA interference pathway.