Small RNAs play a major role in the post-transcriptional regulation of gene expression in eukaryotes. Despite the evolutionary importance of streptophyte algae, knowledge on small RNAs in this group of green algae is almost non-existent. We used genome and transcriptome data of 34 algal and plant species, and performed genome-wide analyses of small RNA (miRNA & siRNA) biosynthetic and degradation pathways. The results suggest that Viridiplantae started to evolve plant-like miRNA biogenesis and degradation after the divergence of the Mesostigmatophyceae in the streptophyte algae. We identified two major evolutionary transitions in small RNA metabolism in streptophyte algae; during the first transition, the origin of DCL-New, DCL1, AGO1/5/10 and AGO4/6/9 in the last common ancestor of Klebsormidiophyceae and all other streptophytes could be linked to abiotic stress responses and evolution of multicellularity in streptophytes. During the second transition, the evolution of DCL 2,3,4, and AGO 2,3,7 as well as DRB1 in the last common ancestor of Zygnematophyceae and embryophytes, suggests their possible contribution to pathogen defense and antibacterial immunity. Overall, the origin and diversification of DICER and AGO along with several other small RNA pathway-related genes among streptophyte algae suggested progressive adaptations of streptophyte algae during evolution to a subaerial environment.