In metazoans, microRNAs (miRNAs) carry out various regulatory functions through association with multiprotein miRNA-induced silencing complexes (miRISCs) that contain Dicer and Argonaute proteins. How miRNAs regulate the expression of their mRNA targets remains a major research question. We have identified the C. elegans ain-1 gene through a genetic suppressor screen and shown that it functions with the heterochronic genetic pathway that regulates developmental timing. Biochemical analysis indicates that AIN-1 interacts with protein complexes containing an Argonaute protein, Dicer, and miRNAs. AIN-1 shares homology with the candidate human neurological disease protein GW182, shown to localize in cytoplasmic processing bodies that are sites of mRNA degradation and storage. A functional AIN-1::GFP also localizes at the likely worm processing bodies. When coexpressed from transgenes, AIN-1 targets ALG-1 to the foci. These results suggest a model where AIN-1 regulates a subset of miRISCs by localization to the processing bodies, facilitating degradation or translational inhibition of mRNA targets.