The endoribonuclease Dicer heterogeneously cleaves short hairpin RNAs (shRNAs) into biologically active small interfering RNAs that have differing efficacies and off-target effects. This study found that promiscuous non-canonical cleavages by Dicer were prevented when the cleavage site was two nucleotides away from a bulge or loop structure. Hepatitis C virus-targeted shRNAs designed to include an internal loop two nucleotides away from the expected site of Dicer cleavage had reduced off-target effects. This finding could aid the design of shRNAs for inducing therapeutic RNA interference.