PIWI-interacting RNAs (piRNAs) guide PIWI proteins to suppress transposons in the cytoplasm and nucleus of animal germ cells, but how silencing in the two compartments is coordinated is not known. Here we demonstrate that endonucleolytic slicing of a transcript by the cytosolic mouse PIWI protein MILI acts as a trigger to initiate its further 5′→3′ processing into non-overlapping fragments. These fragments accumulate as new piRNAs within both cytosolic MILI and the nuclear MIWI2. We also identify Exonuclease domain-containing 1 (EXD1) as a partner of the MIWI2 piRNA biogenesis factor TDRD12. EXD1 homodimers are inactive as a nuclease but function as an RNA adaptor within a PET (PIWI-EXD1-Tdrd12) complex. Loss of Exd1 reduces sequences generated by MILI slicing, impacts biogenesis of MIWI2 piRNAs, and de-represses LINE1 retrotransposons. Thus, piRNA biogenesis triggered by PIWI slicing, and promoted by EXD1, ensures that the same guides instruct PIWI proteins in the nucleus and cytoplasm.