This stage is characterized by generation of siRNA mediated by type III endonuclease Dicer. It appears that the RNAi machinery, once it finds RNA duplexes, cuts it up into small molecules with a length of about 21 nt. These also have 2-nucleotide, 3′ overhangs, and 5′ phosphates. Of course, different organisms have different numbers of Dicer genes that process different sorts of dsRNAs. In Drosophila, Dicer-1 is seen to interact with the dsRBD protein Loquacious (Loqs). Immunoaffinity purification experiments have revealed that Loqs resides in a functional pre-miRNA processing complex, and stimulates and directs specific pre-miRNA processing activity. Dicer-2 requires R2D2, a dsRNA binding protein, which unlike Loq is supposed to be composed of two dsRNA binding domains. Both dsRNA binding domains of Dcr-2 and R2D2 are critical for Dcr-2/R2D2 complex to bind and load siRNA into siRISC complex.

In general, Dicer works by recognizing the ends of dsRNA with its PAZ domain (Dicer has PAZ domain at one end and dual RNase III domains on the opposing end) and then cutting the dsRNA with its RNase III domain. The distance between the PAZ and RNase III domain determines the length of siRNA produced by Dicer which varies by species. Long dsRNA and miRNA precursors are processed to siRNA/miRNA duplexes by the RNase-III-like enzyme Dicer. These short dsRNAs are subsequently unwound and assembled into effector complexes, RISCs, which can direct RNA cleavage, mediate translational repression or induce chromatin modification.

The second step of RNAi mechanism is referred as effector step; the incorporation of guide strand. This is characterized by the formation of silencing complex. The siRNA and miRNA duplexes that contain ribonucleoprotein particles (RNPs) are now made into RISC. Generally, effector complexes containing siRNAs are known as a RISC, while those containing miRNAs are known as miRNPs.

It is thought that RISC undergoes an ATP-dependent step that activates the unwinding of the double-stranded siRNAs. RISC is composed of PPD proteins (PAZ PIWI Domain proteins), which are highly conserved super-family. Members of PPD proteins contain PAZ (100 amino acids) and C-Terminal located PIWI (300 amino acids). The Argonaute protein and one strand of the siRNA form the RISC. Once the RISC complex has been formed from 5′-phosphorylated siRNAs and endogenous Argonaute protein, the siRNAs in the RISC complex guide the degradation that is sequence-specific, of the complementary or near complementary mRNAs. RISC binds to the mRNA which is targeted by the single RNA strand within the complex and cleaves the mRNA or represses their translation by homology-dependent m-RNA degradation. mRNA is cleaved in the middle of its complementary region. This cleaved mRNA cannot be translated. These newly synthesized siRNAs destroy the target with the help of RNA-dependent RNA polymerase (RdRP). Afterwards RISC dissociates and is ready to cleave other mRNAs. By that even a few numbers of the RISC can lead to high-level gene silencing. The siRNA derived in RNAi pathway may have two different fates, either it may be converted into holo-RISC for the destruction of the target m-RNA, or it may contribute to the amplification step by the generation of secondary siRNA.

RISC and miRNP complexes work by catalyzing hydrolysis of the phosphodiester linkage of the target RNA. The mechanism by which repression of translation guided by miRNA works, is not as well understood. It has been suggested that miRNAs affect translation termination or elongation rather than actual initiation of the process. Besides, miRNAs can act as siRNAs and vice versa. Perhaps mRNA degradation and translational regulation guided by miRNAs are used as simultaneous mechanisms for natural regulation.

RNAi has rapidly advanced from a laboratory observation into a major area of research within biology and medicine. The RNAi treatments are entering various stages of clinical trials. However, development of RNAi-based agents has been hindered because siRNAs are unstable in serum and delivery across the cell membrane is highly inefficient. Numerous methods have been developed to facilitate delivery of RNAi in animals and patients, each with their own set of advantages and disadvantages. To improve the effect of RNAi-based therapy, the enzymatic stability and cellular uptake of siRNA should be significantly enhanced, while their immunoactivation should be decreased. The two most common approaches for RNAi delivery are lipid mediated transfection and viral mediated transduction. Typically, researchers strive to achieve the highest levels of transfection efficiency possible. Transfection efficiency describes the percentage of cells that have received the RNAi duplex or expression plasmid. For many disease models, the most desirable cell types to use are primary cultures. However, these cannot be transfected adequately with commercially available transfection reagents. A powerful alternative to cationic lipid-mediated transfection is viral delivery of vectors expressing RNAi sequences. This option is the best for delivery to primary, hard-to-transfect, and non-dividing cells. Viral delivery can also be used to create stable cell lines with inducible RNAi expression or to express RNAi sequences with tissue-specific promoters.

The new technique was taken up by lots of enthusiasm by scientists. It was soon realized that there has not been a tool this sharp in last many years. Besides being an area of intense, upfront basic research, the RNAi process holds the key to future technological applications.