Light plays a key role in the development and physiology of plants. One of the most profound effects of light on plant development is the derepression of expression of an array of light-responsive genes, including the genes encoding the chlorophyll a/b binding proteins (CAB) of photosystem II. To understand the mechanism by which light signals nuclear gene expression, we developed a genetic selection to identify mutants with reduced CAB transcription. Here, we describe a new Arabidopsis locus, CUE1 (for CAB underexpressed). Mutations at this locus result in defects in expression of several light-regulated genes, specifically in mesophyll but not in bundle-associated or epidermis cells. Reduced accumulation of CAB and other photosynthesis-related mRNAs in the mesophyll was correlated with defects in chloroplast development in these cells, resulting in a reticulate pattern with veins greener than the interveinal regions of leaves. Moreover, chalcone synthase mRNA, although known to be regulated by both phytochrome and a blue light receptor, accumulated normally in the leaf epidermis. Dark basal levels of CAB expression were unaffected in etiolated cue1 seedlings; however, induction of CAB transcription by pulses of red and blue light was reduced, suggesting that CUE1 acts downstream from both phytochrome and blue light photoreceptors. CUE1 appears to play a role in the primary derepression of mesophyll-specific gene expression in response to light, because cue1 mutants are severely deficient at establishing photoautotrophic growth. Based on this characterization, we propose that CUE1 is a cell-specific positive regulator linking light and intrinsic developmental programs in Arabidopsis leaf mesophyll cells.