Glioma amplified sequence41 (Gas41) is a highly conserved putative transcription factor that is frequently abundant in human gliomas. Gas41 shows oncogenic activity by promoting cell growth and viability. Here we show Gas41 is required for proper functioning of RNAi machinery in the nuclei, though three basic structural domains of RNAi components PAZ, PIWI and dsRNA binding are absent in the structural sequences. Variations of structural domains are highly conversed among prokaryotes and eukaryotes. Gas41 interacts with cytological RNase III enzyme Dicer1 both biochemically and genetically. However, Drosophila Gas41 functions as chromatin remodeler and interacts with different heterochromatin markers and repeat induced transgene silencing by modulating PEV. We also show that transcriptional inactive Gas41 mutant interferes the functional assembly of heterochromatin associated proteins, H3K9me2 and HP1 in developing embryos. A reduction of heterochromatic markers is accompanied with mini-w promoter sequence in Gas41 mutants. These findings suggest that, Drosophila Gas41 guides the repeat associated gene silencing, and Dicer1 interaction thereby depicting a new role of the Gas41. It is a critical RNAi component. In Drosophila, Gas41 plays a dual role. In one hand, it seems to participate with Dicer 1 in the RNAi pathway and alternatively also participate in repeat-induced gene silencing by accumulating heterochromatin proteins at the mw array promoters. Therefore, it proposes an intriguing and seemingly paradoxical new finding in RNA technology in the process of heterochromatin gene silencing.