Potato MADS box 1 (POTM1) is a member of the SQUAMOSA-like family of plant MADS box genes isolated from an early stage tuber cDNA library. The RNA of POTM1 is most abundant in vegetative meristems of potato (Solanum tuberosum), accumulating specifically in the tunica and corpus layers of the meristem, the procambium, the lamina of new leaves, and newly formed axillary meristems. Transgenic lines with reduced levels of POTM1 mRNA exhibited decreased apical dominance accompanied by a compact growth habit and a reduction in leaf size. Suppression lines produced truncated shoot clusters from stem buds and, in a model system, exhibited enhanced axillary bud growth instead of producing a tuber. This enhanced axillary bud growth was not the result of increased axillary bud formation. Tuber yields were reduced and rooting of cuttings was strongly inhibited in POTM1 suppression lines. Both starch accumulation and the activation of cell division occurred in specific regions of the vegetative meristems of the POTM1 transgenic lines. Cytokinin levels in axillary buds of a transgenic suppression line increased 2- to 3-fold. These results imply that POTM1 mediates the control of axillary bud development by regulating cell growth in vegetative meristems.