Dicer proteins are known to participate in RNA interference (RNAi) by cleaving double-stranded RNA (dsRNA) and pre-micro RNA (pre-miRNA) substrates into ~21-mer short interfering RNAs (siRNAs) and miRNAs, respectively. Studies have shown that Dicer alone forms stable complexes with siRNAs. It is also known that Dicer is one of the components of the active RNA-induced silencing complex (RISC). To enhance guide strand incorporation into RISC and reduce off-target silencing by the siRNA passenger strand, siRNAs are routinely synthesized with a mismatch at the guide strand 5' end. As we have shown that Dicer can interact directly with siRNAs, we examined the impact of terminal sequence and structure, including mismatches, on Dicer-siRNA interactions. We find that Dicer-siRNA binding is correlated with the silencing efficacy of the siRNAs. Besides supporting a role for Dicer in RISC formation and loading with the siRNA, these results also provide a basis for designing siRNAs with enhanced silencing.