During Arabidopsis seed development, the growing embryo invades and consumes the surrounding endosperm tissue. The signalling pathways that coordinate the separation of the embryo from the endosperm and the concomitant breakdown of the endosperm are poorly understood. We have identified a novel bHLH transcription factor, ZHOUPI (ZOU), which mediates these processes. ZOU is expressed exclusively in the endosperm of developing seeds. It is activated in the central cell immediately after fertilization and is initially expressed uniformly in endosperm, subsequently resolving to the embryo surrounding region (ESR). However, zou mutant embryos have defects in cuticle formation and in epidermal cell adhesion, suggesting that ZOU functions non-autonomously to regulate embryonic development. In addition, the endosperm of zou mutant seeds fails to separate from the embryo, restricting embryo expansion and resulting in the production of shrivelled collapsed seeds. zou seeds retain more endosperm than do wild-type seeds at maturity, suggesting that ZOU also controls endosperm breakdown. We identify several target genes whose expression in the ESR is regulated by ZOU. These include ABNORMAL LEAF SHAPE1, which encodes a subtilisin-like protease previously shown to have a similar role to ZOU in regulating endosperm adhesion and embryonic epidermal development. However, expression of several other ESR-specific genes is independent of ZOU. Therefore, ZOU is not a general regulator of endosperm patterning, but rather controls specific signalling pathways that coordinate embryo invasion and breakdown of surrounding endosperm tissues.