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Naturally existing enzymes have been adapted for a variety of molecular technologies, with enhancements or modifications to the enzymes introduced to improve the desired function; however, it is difficult to engineer variants with enhanced activity while maintaining specificity. Here we engineer the compact Obligate Mobile Element Guided Activity (OMEGA) RNA-guided endonuclease IscB and its guiding RNA (ωRNA) by combining ortholog screening, structure-guided protein domain design and RNA engineering, and deep learning-based structure prediction to generate an improved variant, NovaIscB. We show that the compact NovaIscB achieves up to 40% indel activity (~100-fold improvement over wild-type OgeuIscB) on the human genome with improved specificity relative to existing IscBs. We further show that NovaIscB can be fused with a methyltransferase to create a programmable transcriptional repressor, OMEGAoff, that is compact enough to be packaged in a single adeno-associated virus vector for persistent in vivo gene repression. This study highlights the power of combining natural diversity with protein engineering to design enhanced enzymes for molecular biology applications.