ABSTRACT: In eukaryotes, RNA interference (RNAi) is a major mechanism of defense against viruses and transposable elements as well of regulating translation of endogenous mRNAs. The RNAi systems recognize the target RNA molecules via small guide RNAs that are completely or partially complementary to a region of the target. Key components of the RNAi systems are proteins of the Argonaute-PIWI family some of which function as slicers, the nucleases that cleave the target RNA that is base-paired to a guide RNA. Numerous prokaryotes possess the CRISPR-associated system (CASS) of defense against phages and plasmids that is, in part, mechanistically analogous but not homologous to eukaryotic RNAi systems. Many prokaryotes also encode homologs of Argonaute-PIWI proteins but their functions remain unknown.We present a detailed analysis of Argonaute-PIWI protein sequences and the genomic neighborhoods of the respective genes in prokaryotes. Whereas eukaryotic Ago/PIWI proteins always contain PAZ (oligonucleotide binding) and PIWI (active or inactivated nuclease) domains, the prokaryotic Argonaute homologs (pAgos) fall into two major groups in which the PAZ domain is either present or absent. The monophyly of each group is supported by a phylogenetic analysis of the conserved PIWI-domains. Almost all pAgos that lack a PAZ domain appear to be inactivated, and the respective genes are associated with a variety of predicted nucleases in putative operons. An additional, uncharacterized domain that is fused to various nucleases appears to be a unique signature of operons encoding the short (lacking PAZ) pAgo form. By contrast, almost all PAZ-domain containing pAgos are predicted to be active nucleases. Some proteins of this group (e.g., that from Aquifex aeolicus) have been experimentally shown to possess nuclease activity, and are not typically associated with genes for other (putative) nucleases. Given these observations, the apparent extensive horizontal transfer of pAgo genes, and their common, statistically significant over-representation in genomic neighborhoods enriched in genes encoding proteins involved in the defense against phages and/or plasmids, we hypothesize that pAgos are key components of a novel class of defense systems. The PAZ-domain containing pAgos are predicted to directly destroy virus or plasmid nucleic acids via their nuclease activity, whereas the apparently inactivated, PAZ-lacking pAgos could be structural subunits of protein complexes that contain, as active moieties, the putative nucleases that we predict to be co-expressed with these pAgos. All these nucleases are predicted to be DNA endonucleases, so it seems most probable that the putative novel phage/plasmid-defense system targets phage DNA rather than mRNAs. Given that in eukaryotic RNAi systems, the PAZ domain binds a guide RNA and positions it on the complementary region of the target, we further speculate that pAgos function on a similar principle (the guide being either DNA or RNA), and that the uncharacterized domain found in putative operons with the short forms of pAgos is a functional substitute for the PAZ domain.The hypothesis that pAgos are key components of a novel prokaryotic immune system that employs guide RNA or DNA molecules to degrade nucleic acids of invading mobile elements implies a functional analogy with the prokaryotic CASS and a direct evolutionary connection with eukaryotic RNAi. The predictions of the hypothesis including both the activities of pAgos and those of the associated endonucleases are readily amenable to experimental tests.