Argonaute proteins are the core components of effector complexes that facilitate RNA interference (RNAi). Small interfering RNAs (siRNAs) targeted to promoter regions mediate transcriptional gene silencing (TGS) in human cells through heterochromatin formation. RNAi effector complexes have yet to be implicated in the mechanism of mammalian TGS. Here we describe the role of the human Argonaute-1 homolog (AGO1) in directing TGS at the promoters for human immunodeficiency virus-1 coreceptor CCR5 and tumor suppressor RASSF1A. AGO1 associates with RNA polymerase II (RNAPII) and is required for histone H3 Lys9 dimethylation and TGS. AGO1, TAR RNA-binding protein-2 (7TRBP2) and Polycomb protein EZH2 colocalize to the siRNA-targeted RASSF1A promoter, implicating Polycomb silencing in the mechanism of mammalian TGS. These results establish a connection between RNAi components AGO1 and TRBP2, RNAPII transcription and Polycomb-regulated control of gene expression.