MicroRNAs (miRNAs) and small-interfering RNAs (siRNAs) have emerged as important regulators of gene expression in higher eukaryotes. Recent studies indicate that genomes in higher plants encode lineage-specific and species-specific miRNAs in addition to the well-conserved miRNAs. Leguminous plants are grown throughout the world for food and forage production. To date the lack of genomic sequence data has prevented systematic examination of small RNAs in leguminous plants. Medicago truncatula, a diploid plant with a near-completely sequenced genome has recently emerged as an important model legume. We sequenced a small RNA library generated from M. truncatula to identify not only conserved miRNAs but also novel small RNAs, if any. Eight novel small RNAs were identified, of which four (miR1507, miR2118, miR2119 and miR2199) are annotated as legume-specific miRNAs because these are conserved in related legumes. Three novel transcripts encoding TIR-NBS-LRR proteins are validated as targets for one of the novel miRNA, miR2118. Small RNA sequence analysis coupled with the small RNA blot analysis, confirmed the expression of around 20 conserved miRNA families in M. truncatula. Fifteen transcripts have been validated as targets for conserved miRNAs. We also characterized Tas3-siRNA biogenesis in M. truncatula and validated three auxin response factor (ARF) transcripts that are targeted by tasiRNAs. These findings indicate that M. truncatula and possibly other related legumes have complex mechanisms of gene regulation involving specific and common small RNAs operating post-transcriptionally.