Epigenetic mechanisms are involved in the pathogenesis of human cancer. However, what guides epigenetic effectors to specific genomic locations is still unclear. Here, we show that noncoding promoter-associated RNAs (paRNAs) are central elements in the silencing of the CDH1 tumour suppressor gene. The paRNAs acted in concert with AGO1 and coordinated the recruitment of SUV39H1 and HDAC1 to the CDH1 promoter. This epigenetic switch relied on the alternate production of sense and antisense paRNAs that acted, respectively, as transcriptional repressor and activator. The sense paRNA predominated over the antisense transcript in cell lines and human prostate tumour samples with low CDH1 expression. Knock-down of the sense paRNA reactivated CDH1 transcription demonstrating that the equilibrium between sense and antisense paRNA was critical to switch between the repressive and active state. Furthermore, AGO1 knock-down reduced survival, clonogenic and stem-like potential of prostate cancer cells. Together, these findings provide novel insights in the function of AGO1 and paRNAs in epigenetic silencing of tumour suppressor genes and cell transformation.