RNA interference (RNAi) is a eukaryotic molecular system that serves two primary functions: 1) gene regulation and 2) protection against selfish elements such as viruses and transposable DNA. Although the biochemistry of RNAi has been detailed in model organisms, very little is known about the broad-scale patterns and forces that have shaped RNAi evolution. Here, we provide a comprehensive evolutionary analysis of the Dicer protein family, which carries out the initial RNA recognition and processing steps in the RNAi pathway. We show that Dicer genes duplicated and diversified independently in early animal and plant evolution, coincident with the origins of multicellularity. We identify a strong signature of long-term protein-coding adaptation that has continually reshaped the RNA-binding pocket of the plant Dicer responsible for antiviral immunity, suggesting an evolutionary arms race with viral factors. We also identify key changes in Dicer domain architecture and sequence leading to specialization in either gene-regulatory or protective functions in animal and plant paralogs. As a whole, these results reveal a dynamic picture in which the evolution of Dicer function has driven elaboration of parallel RNAi functional pathways in animals and plants.