In Arabidopsis, the central stem cells of the shoot apical meristem (SAM) are indefinitely maintained, whereas those in floral meristems differentiate into female gametophyte-bearing organs termed carpels. The class 1 KNOX genes encode homeodomain transcription factors that function variously in the establishment and maintenance of the SAM, and have also been implicated in carpel development. Here we show that the KNOX gene SHOOT MERISTEMLESS (STM) induces carpel formation and promotes homeotic conversion of ovules to carpels when ectopically expressed in flowers, as previously reported for the related gene KNAT2. In contrast to KNAT2, loss of which confers no phenotype, we show using inducible RNA interference and mutational analysis that progressive loss of STM causes floral phenotypes ranging from reduced formation of placental tissues and inhibited carpel fusion to complete loss of carpel development. These effects result neither from failure to establish the central stem cell niche nor from reduced floral homeotic gene expression, but rather indicate a specific requirement for STM in carpel initiation, as further supported by the loss of leafy carpelloid features in stm leafy double mutants. Activation of carpel development by STM is independent of LEAFY and WUSCHEL, but requires the function of AGAMOUS. The essential role for STM in carpel development, together with its previous reported role in the SAM, shows that, despite the existence of several partially redundant paralogous genes, STM provides the critical KNOX function in the development of both vegetative and reproductive meristematic tissues.