The discovery of RNA-mediated gene-silencing pathways, including RNA interference, highlights a fundamental role of short RNAs in eukaryotic gene regulation and antiviral defence. Members of the Dicer and Argonaute protein families are essential components of these RNA-silencing pathways. Notably, these two families possess an evolutionarily conserved PAZ (Piwi/Argonaute/Zwille) domain whose biochemical function is unknown. Here we report the nuclear magnetic resonance solution structure of the PAZ domain from Drosophila melanogaster Argonaute 1 (Ago1). The structure consists of a left-handed, six-stranded β-barrel capped at one end by two α-helices and wrapped on one side by a distinctive appendage, which comprises a long β-hairpin and a short α-helix. Using structural and biochemical analyses, we demonstrate that the PAZ domain binds a 5-nucleotide RNA with 1:1 stoichiometry. We map the RNA-binding surface to the open face of the β-barrel, which contains amino acids conserved within the PAZ domain family, and we define the 5′-to-3′ orientation of single-stranded RNA bound within that site. Furthermore, we show that PAZ domains from different human Argonaute proteins also bind RNA, establishing a conserved function for this domain.