Argonaute proteins are essential components of the molecular machinery that drives RNA silencing. In Drosophila, different members of the Argonaute family of proteins have been assigned to distinct RNA silencing pathways. While Ago1 is required for microRNA function, Ago2 is a crucial component of the RNA-induced silencing complex in siRNA-triggered RNA interference. Drosophila Ago2 contains an unusual amino-terminus with two types of imperfect glutamine-rich repeats (GRRs) of unknown function. Here we show that the GRRs of Ago2 are essential for the normal function of the protein. Alleles with reduced numbers of GRRs cause specific disruptions in two morphogenetic processes associated with the midblastula transition: membrane growth and microtubule-based organelle transport. These defects do not appear to result from disruption of siRNA-dependent processes but rather suggest an interference of the mutant Ago2 proteins in an Ago1-dependent pathway. Using loss-of-function alleles, we further demonstrate that Ago1 and Ago2 act in a partially redundant manner to control the expression of the segment-polarity gene wingless in the early embryo. Our findings argue against a strict separation of Ago1 and Ago2 functions and suggest that these proteins act in concert to control key steps of the midblastula transition and of segmental patterning.