RNAi plays a central role in the regulation of eukaryotic genes. In Schizosaccharomyces pombe fission yeast, RNAi involves the formation of siRNA from dsRNA that acts to establish and maintain heterochromatin over centromeres, telomeres, and mating loci. We showed previously that transient heterochromatin also forms over S. pombe convergent genes (CGs). Remarkably, most RNAi genes are themselves convergent. We demonstrate here that transient heterochromatin formed by the RNAi pathway over RNAi CGs leads to their autoregulation in G1-S. Furthermore, the switching of RNAi gene orientation from convergent to tandem causes loss of their G1-S down-regulation. Surprisingly, yeast mutants with tandemized dcr1, ago1, or clr4 genes display aberrant centromeric heterochromatin, which results in abnormal cell morphology. Our results emphasize the significance of gene orientation for correct RNAi gene expression, and suggest a role for cell cycle-dependent formation of RNAi CG heterochromatin in cellular integrity.