PIWI-clade Argonaute proteins associate with PIWI-interacting RNAs (piRNAs), and silence transposons in animal gonads. Here, we report the crystal structure of the Drosophila PIWI-clade Argonaute Piwi in complex with endogenous piRNAs, at 2.9 Å resolution. A structural comparison of Piwi with other Argonautes highlights the PIWI-specific structural features, such as the overall domain arrangement and metal-dependent piRNA recognition. Our structural and biochemical data reveal that, unlike other Argonautes including silkworm Siwi, Piwi has a non-canonical DVDK tetrad and lacks the RNA-guided RNA cleaving slicer activity. Furthermore, we find that the Piwi mutant with the canonical DEDH catalytic tetrad exhibits the slicer activity and readily dissociates from less complementary RNA targets after the slicer-mediated cleavage, suggesting that the slicer activity could compromise the Piwi-mediated co-transcriptional silencing. We thus propose that Piwi lost the slicer activity during evolution to serve as an RNA-guided RNA-binding platform, thereby ensuring faithful co-transcriptional silencing of transposons.