This report describes the characterisation of ATHB16, a novel Arabidopsis thaliana homeobox gene, which encodes a homeodomain-leucine zipper class I (HDZip I) protein. We demonstrate that ATHB16 functions as a growth regulator, potentially as a component in the light-sensing mechanism of the plant. Endogenous ATHB16 mRNA was detected in all organs of Arabidopsis, at highest abundance in rosette leaves. Reduced levels of ATHB16 expression in transgenic Arabidopsis plants caused an increase in leaf cell expansion and consequently an increased size of the leaves, whereas leaf shape was unaffected. Transgenic plants with increased ATHB16 mRNA levels developed leaves that were smaller than wild-type leaves. Therefore, we suggest ATHB16 to act as a negative regulator of leaf cell expansion. Furthermore, the flowering time response to photoperiod was increased in plants with reduced ATHB16 levels but reduced in plants with elevated ATHB16 levels, indicating that ATHB16 has an additional role as a suppressor of the flowering time sensitivity to photoperiod in wild-type Arabidopsis. As deduced from the response of transgenic plants with altered levels of ATHB16 expression in hypocotyl elongation assays, the gene may act to regulate plant development as a mediator of a blue light response.