In animal gonads, PIWI-clade Argonaute proteins repress transposons sequence-specifically via bound Piwi-interacting RNAs (piRNAs). These are processed from single-stranded precursor RNAs by largely unknown mechanisms. Here we show that primary piRNA biogenesis is a 3'-directed and phased process that, in the Drosophila germ line, is initiated by secondary piRNA-guided transcript cleavage. Phasing results from consecutive endonucleolytic cleavages catalyzed by Zucchini, implying coupled formation of 3' and 5' ends of flanking piRNAs. Unexpectedly, Zucchini also participates in 3' end formation of secondary piRNAs. Its function can, however, be bypassed by downstream piRNA-guided precursor cleavages coupled to exonucleolytic trimming. Our data uncover an evolutionarily conserved piRNA biogenesis mechanism in which Zucchini plays a central role in defining piRNA 5' and 3' ends.