The Tudor domain-containing proteins (TDRDs) are an evolutionarily conserved family of proteins involved in germ cell development. We show here that in mice, TDRD5 is a novel component of the intermitochondrial cements (IMCs) and the chromatoid bodies (CBs), which are cytoplasmic ribonucleoprotein granules involved in RNA processing for spermatogenesis. Tdrd5-deficient males are sterile because of spermiogenic arrest at the round spermatid stage, with occasional failure in meiotic prophase. Without TDRD5, IMCs and CBs are disorganized, with mislocalization of their key components, including TDRD1/6/7/9 and MIWI/MILI/MIWI2. In addition, Tdrd5-deficient germ cells fail to repress LINE-1 retrotransposons with DNA-demethylated promoters. Cyclic adenosine monophosphate response element modulator (CREM) and TRF2, key transcription factors for spermiogenesis, are expressed in Tdrd5-deficient round spermatids, but their targets, including Prm1/Prm2/Tnp1, are severely down-regulated, which indicates the importance of IMC/CB-mediated regulation for postmeiotic gene expression. Strikingly, Tdrd5-deficient round spermatids injected into oocytes contribute to fertile offspring, demonstrating that acquisition of a functional haploid genome may be uncoupled from TDRD5 function.