Adenosine deaminases acting on RNA (ADARs) are best known for altering the coding sequences of mRNA through RNA editing, as in the GluR-B Q/R site. ADARs have also been shown to affect RNA interference (RNAi) and microRNA processing by deamination of specific adenosines to inosine. Here, we show that ADAR proteins can affect RNA processing independently of their enzymatic activity. We show that ADAR2 can modulate the processing of mir-376a2 independently of catalytic RNA editing activity. In addition, in a Drosophila assay for RNAi deaminase-inactive ADAR1 inhibits RNAi through the siRNA pathway. These results imply that ADAR1 and ADAR2 have biological functions as RNA-binding proteins that extend beyond editing per se and that even genomically encoded ADARs that are catalytically inactive may have such functions.