In Drosophila ovaries, distinct Piwi-interacting RNA (piRNA) pathways defend against transposons in somatic and germline cells. Germline piRNAs predominantly arise from bidirectional clusters and are amplified by the ping-pong cycle. In this study, we characterize a novel Drosophila gene, kumo and show that it encodes a conserved germline piRNA pathway component. Kumo contains five tudor domains and localizes to nuage, a unique structure present in animal germline cells, which is considered to be the processing site for germline piRNAs. Transposons targeted by the germline piRNA pathway are derepressed in kumo mutant females. Moreover, germline piRNA production is significantly reduced in mutant ovaries, thereby indicating that kumo is required to generate germline piRNAs. Kumo localizes to the nuage as well as to nucleus early female germ cells, where it is required to maintain cluster transcript levels. Our data suggest that kumo facilitates germline piRNA production by promoting piRNA cluster transcription in the nucleus and piRNA processing at the nuage.