MicroRNAs (miRNAs) originate from primary transcripts (pri-miRNAs) with characteristic stem-loop structures, and their accurate processing is required for the production of functional miRNAs. Here, using the pri-miR-166 family in Arabidopsis thaliana as a paradigm, we report the crucial role of pri-miRNA terminal loops in miRNA biogenesis. We found that multibranched terminal loops in pri-miR-166s substantially suppress miR-166 expression in vivo. Unlike canonical processing of pri-miRNAs, terminal loop–branched pri-miRNAs can be processed by Dicer-like 1 (DCL1) complexes bidirectionally from base to loop and from loop to base, resulting in productive and abortive processing of miRNAs, respectively. In both cases, DCL1 complexes canonically cut pri-miRNAs at a distance of 16–17 bp from a reference single-stranded loop region. DCL1 also adjusts processing sites toward an internal loop through its helicase domain. These results provide new insight into the poorly understood processing mechanism of pri-miRNAs with complex secondary structures.