Here we report a novel Arabidopsis dwarf mutant, fackel-J79, whose adult morphology resembles that of brassinosteroid-deficient mutants but also displays distorted embryos, supernumerary cotyledons, multiple shoot meristems, and stunted roots. We cloned the FACKEL gene and found that it encodes a protein with sequence similarity to both the human sterol reductase family and yeast C-14 sterol reductase and is preferentially expressed in actively growing cells. Biochemical analysis indicates that the fk-J79 mutation results in deficient C-14 sterol reductase activity, abnormal sterol composition, and reduction of brassinosteroids (BRs). Unlike other BR-deficient mutants, the defect of hypocotyl elongation in fk-J79 cannot be corrected by exogenous BRs. The unique phenotypes and sterol composition in fk-J79 indicate crucial roles of sterol regulation and signaling in cell division and cell expansion in embryonic and post-embryonic development in plants.