Though miR-205 function has been largely characterized, the nature of its host gene, MIR205HG, is still completely unknown. Here, we show that only lowly expressed alternatively spliced MIR205HG transcripts act as de facto pri-miRNAs, through a process that involves Drosha to prevent unfavorable splicing and directly mediate miR-205 excision. Notably, MIR205HG-specific processed transcripts revealed to be functional per se as nuclear long noncoding RNA capable of regulating differentiation of human prostate basal cells through control of the interferon pathway. At molecular level, MIR205HG directly binds the promoters of its target genes, which have an Alu element in proximity of the Interferon-Regulatory Factor (IRF) binding site, and represses their transcription likely buffering IRF1 activity, with the ultimate effect of preventing luminal differentiation. As MIR205HG functions autonomously from (albeit complementing) miR-205 in preserving the basal identity of prostate epithelial cells, it warrants reannotation as LEADeR (Long Epithelial Alu-interacting Differentiation-related RNA).