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RNAi is an evolutionarily fluid mechanism with dramatically different activities across animal phyla. One major group where there has been little investigation is annelid worms. Here, the small RNAs of the polychaete developmental model Capitella teleta are profiled across development. As is seen with nearly all animals, nearly 200 microRNAs were found with 58 high-confidence novel species. Greater miRNA diversity was associated with later stages consistent with differentiation of tissues. Outside miRNA, a distinct composition of other small RNA pathways was found. Unlike many invertebrates, an endogenous siRNA pathway was not observed, indicating pathway loss relative to basal planarians. No processively generated siRNA-class RNAs could be found arising from dsRNA precursors. This has a significant impact on RNAi technology development for this group of animals. Unlike the apparent absence of siRNAs, a significant population of piRNAs was observed. For many piRNAs, phasing and ping-pong biogenesis pathways were identified. Interestingly, piRNAs were found to be highly expressed during early development, suggesting a potential role in regulation in metamorphosis. Critically, the configuration of RNAi factors in C. teleta is found in other annelids and mollusks, suggesting that similar biology is likely to be present in the wider clade. This study is the first in providing comprehensive analysis of small RNAs in annelids.