RNA-binding proteins are essential for cellular functions, playing a role in every stage of a transcript's lifecycle, including pre-mRNA splicing, capping, polyadenylation, and cytoplasmic post-transcriptional regulation. NHL-2, an RNA-binding protein and member of the conserved TRIM-NHL protein family, is involved in various aspects of gene regulation in C. elegans, impacting both germline and somatic cells and contributing to normal reproduction. It is a cofactor in regulating developmental timing and cell fate progression through miRNA pathways by positively influencing RNA-Induced Silencing Complex (RISC) activity. However, the role of NHL-2 in the germline has not been thoroughly investigated despite early embryonic defects observed in its absence. Our studies have shown that NHL-2 is crucial for transgenerational epigenetic inheritance mediated by small RNAs, although the underlying mechanism remains unclear. We also found that NHL-2 RNA binding mutants, Loss of Function (lf) and Gain of Function (gf), exhibit phenotypes like the null mutant, indicating the importance of RNA-binding kinetics for its function. Confocal microscopy revealed that NHL-2 localises to P bodies in the proximity of germ granules at nuclear pores in the germline. Interestingly, in the CRISPR-generated strain that lacks RNA binding capacity to bind RNA, NHL-2 levels in the germline significantly decrease due to proteasomal degradation, suggesting a self-ubiquitination mechanism via its RING domain. Unexpectedly, somatic P bodies are double in size in NHL-2 RNA-binding (lf) mutant. We have uncovered that NHL-2 is also involved in the somatic nuclear RNA interference (RNAi) pathway, where small RNA-mediated processes target genes for epigenetic silencing. NHL-2 interacts with DDX-6, and other translational repression proteins, LSM-14 and 4ET, are required for efficient somatic nuclear RNAi, suggesting that translational repression of RNAi targets is critical for producing effector small RNAs. In conclusion, NHL-2 plays multiple roles in coordinating gene expression and small RNA-related pathways.