Small RNAs play a crucial role in genome defense against transposable elements and guide Argonaute proteins to nascent RNA transcripts to induce co-transcriptional gene silencing. However, the molecular basis of this process remains unknown. Here, we identify the conserved RNA helicase Aquarius/EMB-4 as a direct and essential link between small RNA pathways and the transcriptional machinery in $Caenorhabditis\; elegans$. Aquarius physically interacts with the germline Argonaute HRDE-1. Aquarius is required to initiate small-RNA-induced heritable gene silencing. HRDE-1 and Aquarius silence overlapping sets of genes and transposable elements. Surprisingly, removal of introns from a target gene abolishes the requirement for Aquarius, but not HRDE-1, for small RNA-dependent gene silencing. We conclude that Aquarius allows small RNA pathways to compete for access to nascent transcripts undergoing co-transcriptional splicing in order to detect and silence transposable elements. Thus, Aquarius and HRDE-1 act as gatekeepers coordinating gene expression and genome defense.