Rapid modulation of gene expression is a key feature for the success of bacteria, particularly for those that rapidly have to adapt to different niches. The lifecycles of Photorhabdus and Xenorhabdus involve a mutualistic association with nematodes as well as an entomopathogenic phase1,2, both of which rely on the production of numerous specialized metabolites (SMs) 3,4. Several regulators have been previously implicated in the regulation of SM production in these genera3,4. However, the molecular underpinnings regulating SM production and the role of small regulatory RNAs (sRNAs) in this process are unknown. Here we describe the mechanism underlying RNA-mediated control of SM synthesis. We show that the Hfq-dependent sRNA, ArcZ, is an essential requirement for SM production. We discovered that ArcZ directly base-pairs with the mRNA encoding HexA, a key repressor of SM genes. We further demonstrate that the ArcZ regulon is not restricted to SM production, but rather modulates up to ~15% of the transcriptional output in both Photorhabdus and Xenorhabdus. Together, our study shows that sRNAs are crucial for SM production in these species, reveals previously unknown targets for biosynthetic pathway manipulations, and offers a new tool for the (over)production, isolation and identification of unknown natural products.