Double-stranded RNA (dsRNA) production in cells is known to activate the RNA interference (RNAi) pathway in almost all eukaryotic organisms and to trigger the transcription-based interferon response in mammals. The filamentous fungus Neurospora crassa, an organism that broadly employs gene silencing in regulation of gene expression, offers a unique and powerful system for understanding the RNAi pathway and its function in eukaryotes. We showed that the Neurospora RNAi pathway, like those in higher eukaryotes, uses small RNAs to mediate posttranscriptional gene silencing. We also showed that dsRNA leads to the transcriptional activation of many genes in Neurospora, including most of the RNAi components, putative antiviral genes, and homologs of the interferon stimulated genes. Furthermore, we discovered a novel type of small RNA that is dramatically induced after DNA damage. In addition, we found that DNA damage results in the production aberrant RNA from the loci where small RNAs are produced. These studies suggested evolutionarily conserved roles of RNAi in gene silencing and defense mechanisms and a novel link between RNAi pathway and DNA repair/replication processes. In Specific Aim 1, we will determine the signaling pathway responsible for dsRNA-induced gene transcription. We will identify the components of this pathway by both forward and reverse genetic approaches. This study will lead to the understanding of a novel dsRNA activated signaling pathway that may be relevant in mammals. In Specific Aim 2, we will determine the biogenesis and function of the DNA damage- induced small RNA. This study will reveal the role and the mechanism of RNAi in DNA repair and in maintaining genome stability. In addition, we will investigate the mechanism of aberrant RNA production after DNA damage. These proposed studies, using a combination of genetic, biochemical and physiological approaches, will have important implications for the understanding of eukaryotic gene silencing and defense responses in general. PUBLIC HEALTH RELEVANCE RNA interference (RNAi) and related pathways regulate gene expression, development, genome stability and defense responses in human. The dsRNA-induced interferon response is an important part of the human innate immunity toward viral infection. The impairment of these pathways can result in developmental abnormality, cancer or immune deficiency. Furthermore, development and adoption of RNAi technologies have been extensively used in pharmaceutical target validation and in therapeutic development. Our goal is to understand the function and regulation of these pathways in human using a simple eukaryotic model system. A better understanding of these pathways will potentially lead to new therapeutic approaches for treating human diseases.