Leaf morphology and the pattern of shoot branching determine to a large extent the growth habit of seed plants. Until recently, the developmental processes that led to the establishment of these morphological structures seemed unrelated. Here, we show that the tomato Trifoliate (Tf) gene plays a crucial role in both processes, affecting the formation of leaflets in the compound tomato leaf and the initiation of axillary meristems in the leaf axil. Tf encodes a myeloblastosis oncoprotein (MYB)-like transcription factor related to the Arabidopsis thaliana LATERAL ORGAN FUSION1 (LOF1) and LOF2 proteins. Tf is expressed in the leaf margin, where leaflets are formed, and in the leaf axil, where axillary meristems initiate. During tomato ontogeny, expression of Tf in young leaf primordia increases, correlating with a rise in leaf dissection (heteroblasty). Formation of leaflets and initiation of axillary meristems can be traced back to groups of pluripotent cells. Tf function is required to inhibit differentiation of these cells and thereby to maintain their morphogenetic competence, a fundamental process in plant development. KNOTTED1-LIKE proteins, which are known regulators in tomato leaf dissection, require Tf activity to exert their function in the basal part of the leaf. Similarly, the plant hormone auxin needs Tf activity to initiate the formation of lateral leaflets. Thus, leaf dissection and shoot branching rely on a conserved mechanism that regulates the morphogenetic competence of cells at the leaf margin and in the leaf axil.