The signal transduction pathway governed by the phytohormone abscisic acid (ABA) regulates not only abiotic stress responses but also early developmental programs such as seed dormancy, germination and seedling growth in response to environmental signals. Optimal plant growth and development depend on the integration of environmental stimuli and intrinsic developmental programs. Here, we show that the homeodomain transcription factors BLH1 and KNAT3, previously implicated in embryo sac development, have additional functions in ABA-mediated seed dormancy and early seedling development. The ABA-dependent induction of BLH1 and KNAT3 expression required the presence of functional PYR/PYL/RCAR receptors. The blh1 and knat3 mutants were less sensitive than the wild-type to ABA or salinity exposure during seed germination and early seedling development. In contrast, BLH1 over-expressing lines were hypersensitive to ABA and salinity, and exhibited increased expression of ABA-responsive genes, such as ABI3 and ABI5. BLH1 interacted with KNAT3 and enhanced the retention of KNAT3 in the nucleus. BLH1 and KNAT3 synergistically increased the ABA responses by binding to and subsequently activating the ABI3 promoter. Taken together, we propose that BLH1 and KNAT3 together modulate seed germination and early seedling development by directly regulating ABI3 expression.