Dicer has a key role in small RNA biogenesis, processing double-stranded RNAs (dsRNAs)^1,2. Human DICER (hDICER, also known as DICER1) is specialized for cleaving small hairpin structures such as precursor microRNAs (pre-miRNAs) and has limited activity towards long dsRNAs—unlike its homologues in lower eukaryotes and plants, which cleave long dsRNAs. Although the mechanism by which long dsRNAs are cleaved has been well documented, our understanding of pre-miRNA processing is incomplete because structures of hDICER in a catalytic state are lacking. Here we report the cryo-electron microscopy structure of hDICER bound to pre-miRNA in a dicing state and uncover the structural basis of pre-miRNA processing. hDICER undergoes large conformational changes to attain the active state. The helicase domain becomes flexible, which allows the binding of pre-miRNA to the catalytic valley. The double-stranded RNA-binding domain relocates and anchors pre-miRNA in a specific position through both sequence-independent and sequence-specific recognition of the newly identified ‘GYM motif’³. The DICER-specific PAZ helix is also reoriented to accommodate the RNA. Furthermore, our structure identifies a configuration of the 5′ end of pre-miRNA inserted into a basic pocket. In this pocket, a group of arginine residues recognize the 5′ terminal base (disfavouring guanine) and terminal monophosphate; this explains the specificity of hDICER and how it determines the cleavage site. We identify cancer-associated mutations in the 5′ pocket residues that impair miRNA biogenesis. Our study reveals how hDICER recognizes pre-miRNAs with stringent specificity and enables a mechanistic understanding of hDICER-related diseases.