Piwi-interacting RNAs (piRNAs) are important for genome regulation across metazoans, but their biogenesis evolves rapidly. In Caenorhabditis elegans, piRNA loci are clustered within two 3-Mb regions on chromosome IV. Each piRNA locus possesses an upstream motif that recruits RNA polymerase II to produce an ∼28 nt primary transcript. We used comparative epigenomics across nematodes to gain insight into the origin, evolution, and mechanism of nematode piRNA biogenesis. We show that the piRNA upstream motif is derived from core promoter elements controlling snRNA transcription. We describe two alternative modes of piRNA organization in nematodes: in C. elegans and closely related nematodes, piRNAs are clustered within repressive H3K27me3 chromatin, while in other species, typified by Pristionchus pacificus, piRNAs are found within introns of active genes. Additionally, we discover that piRNA production depends on sequence signals associated with RNA polymerase II pausing. We show that pausing signals synergize with chromatin to control piRNA transcription.