The evolutionary origin of human hepatitis delta virus ( HDV) replication by RNA-directed transcription is unclear. Here we identify two species of 5'-capped, similar to 18-25-nucleotide small RNAs. One was of antigenomic polarity, corresponding to the 5' end of hepatitis delta antigen ( HDAg) mRNA, and interacted with HDAg and RNA polymerase II ( Pol II), whereas the other mapped to a structurally analogous region on the genomic RNA hairpin. An HDAg-interaction screen indicated that HDAg interacts with MOV10, the human homolog of the Arabidopsis thaliana RNA amplification factor gene SDE3 and Drosophila melanogaster RISC-maturation factor gene Armitage ( armi). MOV10 knockdown inhibited HDV replication, but not HDAg mRNA translation, further supporting a role for MOV10 in RNA-directed transcription. Together, our studies define RNA hairpins as critical elements for the initiation of HDV-related, RNA-directed transcription. The identification of capped small RNAs and the involvement of MOV10 in HDV replication further suggest a conserved mechanism related to RNA-directed transcription in lower eukaryotes.