The pluripotency factor Lin28 blocks the expression of let-7 microRNAs in undifferentiated cells during development, and functions as an oncogene in a subset of cancers. Lin28 binds to let-7 precursor (pre-let-7) RNAs and recruits 3′ terminal uridylyl transferases to selectively inhibit let-7 biogenesis^,,. Uridylated pre-let-7 is refractory to processing by Dicer, and is rapidly degraded by an unknown RNase. Here we identify Dis3l2 as the 3′–5′ exonuclease responsible for the decay of uridylated pre-let-7 in mouse embryonic stem cells. Biochemical reconstitution assays show that 3′ oligouridylation stimulates Dis3l2 activity in vitro, and knockdown of Dis3l2 in mouse embryonic stem cells leads to the stabilization of pre-let-7. Our study establishes 3′ oligouridylation as an RNA decay signal for Dis3l2, and identifies the first physiological RNA substrate of this new exonuclease, which is mutated in the Perlman syndrome of fetal overgrowth and causes a predisposition to Wilms’ tumour development.