RNAi is a conserved genome defense mechanism in eukaryotes that protects against deleterious effects of transposons and viral invasion. Repetitive DNA loci are a major source for the production of eukaryotic small RNAs, but how these small RNAs are produced is not clear. Quelling in Neurospora is one of the first known RNAi-related phenomena and is triggered by the presence of multiple copies of transgenes. Here we showed that DNA tandem repeats and double-strand breaks are necessary and, when both are present, sufficient to trigger gene silencing and siRNA production. Introduction of a site-specific double-strand break or DNA fragile site resulted in homologous recombination of repetitive sequences, which is required for gene silencing. In addition to siRNA production, the quelling pathway also maintains tandem repeats by regulating homologous recombination. Our study identified the mechanistic trigger for siRNA production from repetitive DNA and established a role for siRNA in maintaining genome stability.