MicroRNAs (miRNAs) are endogenous non-coding ~21 nucleotide (nt) RNAs that regulate gene expression at transcriptional and post-transcriptional levels in plants and animals. They play an important role in development, abiotic stress and pathogen responses. miRNAs with their targets have been widely studied in model plants, but limited knowledge is available on the small RNA population of cotton (Gossypium hirsutum)-an important economic crop, and global identification of related targets through degradome sequencing has not been developed previously. In this study, we identified small RNAs and their targets during cotton somatic embryogenesis (SE) through high throughput small RNA and degradome sequencing, comparing seedling hypocotyl and embryogenic callus (EC) of G. hirsutum YZ1. A total of 36 known miRNA families were found to be differentially expressed, of which 19 miRNA families were represented by 29 precursors. 25 novel miRNAs were identified. 234 transcripts in EC and 322 transcripts in control (CK) were found to be the targets of 23 and 30 known miRNA families respectively, and 16 transcripts were targeted by 8 novel miRNAs. Interestingly, four trans-acting small interfering RNAs (tas3-siRNAs) were also found in degradome libraries, which perfectly matched their precursors. Several targets were further validated via RNA ligase-mediated 5′ rapid amplification of cDNA ends (RLM 5′-RACE). The profiling of the miRNAs and their target genes provides new information on the miRNAs network during cotton SE.