Rice tillering is an important agronomic trait for grain production. The HIGH-TILLERING DWARF1 (HTD1) gene encodes an ortholog of Arabidopsis MAX3. Complementation analyses for HTD1 confirm that the defect in HTD1 is responsible for both high-tillering and dwarf phenotypes in the htd1 mutant. The rescue of the Arabidopsis max3 mutant phenotype by the introduction of Pro35S:HTD1 indicates HTD1 is a carotenoid cleavage dioxygenase that has the same function as MAX3 in synthesis of a carotenoid-derived signal molecule. The HTD1 gene is expressed in both shoot and root tissues. By evaluating ProHTD1:GUS expression, we found that the HTD1 gene is mainly expressed in vascular bundle tissues throughout the plant. Auxin induction of HTD1 expression suggests that auxin may regulate rice tillering partly through upregulation of HTD1 gene transcription. Restoration of dwarf phenotype after the removal of axillary buds indicates that the dwarfism of the htd1 mutant may be a consequence of excessive tiller production. In addition, the expression of HTD1, D3 and OsCCD8a in the htd1 and d3 mutants suggests a feedback mechanism may exist for the synthesis and perception of the carotenoid-derived signal in rice. Characterization of MAX genes in Arabidopsis, and identification of their orthologs in pea, petunia and rice indicates the existence of a conserved mechanism for shoot-branching regulation in both monocots and dicots.