Small RNAs play a crucial role in genome defense against transposable elements and guide Argonaute proteins to nascent RNA transcripts to induce co-transcriptional gene silencing. However, the molecular basis of this process remains unknown. Here, we identify the conserved RNA helicase Aquarius/EMB-4 as a direct and essential link between small RNA pathways and the transcriptional machinery in Caenorhabditis elegans. Aquarius physically interacts with the germline Argonaute HRDE-1. Aquarius is required to initiate small-RNA-induced heritable gene silencing. HRDE-1 and Aquarius silence overlapping sets of genes and transposable elements. Surprisingly, removal of introns from a target gene abolishes the requirement for Aquarius, but not HRDE-1, for small RNA-dependent gene silencing. We conclude that Aquarius allows small RNA pathways to compete for access to nascent transcripts undergoing co-transcriptional splicing in order to detect and silence transposable elements. Thus, Aquarius and HRDE-1 act as gatekeepers coordinating gene expression and genome defense.A.C.B. was supported by an HFSP grant to E.A.M. (RPG0014/2015). This work was supported by Cancer Research UK (C13474/A18583, C6946/A14492), the Wellcome Trust (104640/Z/14/Z, 092096/Z/10/Z), and The European Research Council (ERC, grant 260688). The work of P.M. and X.Z. is supported by NIH grant R01GM113242 and NIH grant R01GM122080. R.M. was a Commonwealth Scholar, funded by the UK Government. J.M.C., A.N., and C.J.W. were supported by the CIHR (MOP-274660) and the Canada Research Chairs Program. A.I.L. was supported by a Wellcome Trust Programme Grant (108058/Z/15/Z) and M.L was supported by 2013/RSE/SCOTGOV/ MARIECURIE