We have studied the function of a conserved germline-specific nucleotidyltransferase protein, CDE-1, in RNAi and chromosome segregation in C. elegans. CDE-1 localizes specifically to mitotic chromosomes in embryos. This localization requires the RdRP EGO-1, which physically interacts with CDE-1, and the Argonaute protein CSR-1. We found that CDE-1 is required for the uridylation of CSR-1 bound siRNAs, and that in the absence of CDE-1 these siRNAs accumulate to inappropriate levels, accompanied by defects in both meiotic and mitotic chromosome segregation. Elevated siRNA levels are associated with erroneous gene silencing, most likely through the inappropriate loading of CSR-1 siRNAs into other Argonaute proteins. We propose a model in which CDE-1 restricts specific EGO-1-generated siRNAs to the CSR-1 mediated, chromosome associated RNAi pathway, thus separating it from other endogenous RNAi pathways. The conserved nature of CDE-1 suggests that similar sorting mechanisms may operate in other animals, including mammals.