Small RNAs exert an effect through diverse RNA interference pathways to transcriptionally or post-transcriptionally silence their targets. The Piwi-interacting RNAs (piRNAs) represent a germline-specific small RNA pathway where Piwi proteins themselves are thought to mediate piRNA biosynthesis. Here, we provide strong evidence for a piRNA amplification loop in zebrafish, in which Ziwi and Zili bind piRNAs of opposite polarity. Furthermore, we describe a function for Zili in transposon defense and germ cell differentiation, as well as a crucial function in meiosis, significantly extending the function of Piwi proteins beyond the control of transposable elements in vertebrates.