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 & PRIME; 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.