Movement of transposons causes insertions, deletions, and chromosomal rearrangements potentially leading to premature lethality in Drosophila melanogaster. To repress these elements and combat genomic instability, eukaryotes have evolved several small RNA-mediated defense mechanisms. Specifically, in Drosophila somatic cells, endogenous small interfering (esi)RNAs suppress retrotransposon mobility. EsiRNAs are produced by Dicer-2 processing of double-stranded RNA precursors, yet the origins of these precursors are unknown. We show that most transposon families are transcribed in both the sense (S) and antisense (AS) direction in Dmel-2 cells. LTR retrotransposons Dm297, mdg1, and blood, and non-LTR retrotransposons juan and jockey transcripts, are generated from intraelement transcription start sites with canonical RNA polymerase II promoters. We also determined that retrotransposon antisense transcripts are less polyadenylated than sense. RNA-seq and small RNA-seq revealed that Dicer-2 RNA interference (RNAi) depletion causes a decrease in the number of esiRNAs mapping to retrotransposons and an increase in expression of both S and AS retrotransposon transcripts. These data support a model in which double-stranded RNA precursors are derived from convergent transcription and processed by Dicer-2 into esiRNAs that silence both sense and antisense retrotransposon transcripts. Reduction of sense retrotransposon transcripts potentially lowers element-specific protein levels to prevent transposition. This mechanism preserves genomic integrity and is especially important for Drosophila fitness because mobile genetic elements are highly active.