The proper functioning of centromeres requires a complex cascade of epigenetic events involving chromatin and kinetochore assembly; however, the precise mechanism by which this cascade proceeds is unknown. The pivotal event during kinetochore formation is the "loading," or deposition, of CENP-A. This histone H3 variant is specific to centromeres and replaces conventional H3 in centromeric chromatin. Failure to load CENP-A into mammalian centromeres in late telophase/early G1 of the cell cycle leads to malsegregation and cell division defects in subsequent cell cycles. Mounting evidence supports the hypothesis that an RNA component is involved, although how RNAs participate in centromere formation in mammals has remained unknown. Using the marsupial model, the tammar wallaby, we show that centromeric retroelements produce small RNAs and that hypermorphic expression of these centromeric small RNAs results in disruption of CENP-A localization. We propose that tight regulation of the processing of this new class of small RNAs, crasiRNAs, is an integral component of the epigenetic framework necessary for centromere establishment.