Numerous noncoding transcripts of unknown function have recently been identified. In this study, we report a novel mechanism that relies on transcription of noncoding RNA prt (pho1-repressing transcript) regulating expression of the pho1 gene. A product of this gene, Pho1, is a major secreted phosphatase needed for uptake of extracellular phosphate in fission yeast. prt is produced from the promoter located upstream of the pho1 gene in response to phosphate, and its transcription leads to deposition of RNAi-dependent H3K9me2 across the pho1 locus. In contrast, phosphate starvation leads to loss of H3K9me2 and pho1 induction. Strikingly, deletion of Clr4, a H3K9 methyltransferase, results in faster pho1 induction in response to phosphate starvation. We propose a new role for noncoding transcription in establishing transient heterochromatin to mediate an effective transcriptional response to environmental stimuli. RNAi recruitment to prt depends on the RNA-binding protein Mmi1. Importantly, we found that the exosome complex and Mmi1 are required for transcription termination and the subsequent degradation of prt but not pho1 mRNA. Moreover, in mitotic cells, transcription termination of meiotic RNAs also relies on this mechanism. We propose that exosome-dependent termination constitutes a specialized system that primes transcripts for degradation to ensure their efficient elimination. 