KNOTTED1-like homeobox (KNOX) genes promote stem cell activity and must be repressed to form determinate lateral organs. Stable KNOX gene silencing during organogenesis is known to involve the predicted DNA binding proteins ASYMMETRIC LEAVES1 (AS1) and AS2 as well as the chromatin-remodeling factor HIRA. However, the mechanism of silencing is unknown. Here, we show that AS1 and AS2 form a repressor complex that binds directly to the regulatory motifs CWGTTD and KMKTTGAHW present at two sites in the promoters of the KNOX genes BREVIPEDICELLUS (BP) and KNAT2. The two binding sites act nonredundantly, and interaction between AS1-AS2 complexes at these sites is required to repress BP. Promoter deletion analysis further indicates that enhancer elements required for BP expression in the leaf are located between the AS1-AS2 complex binding sites. We propose that AS1-AS2 complexes interact to create a loop in the KNOX promoter and, likely through recruitment of HIRA, form a repressive chromatin state that blocks enhancer activity during organogenesis. Our model for AS1-AS2-mediated KNOX gene silencing is conceptually similar to the action of an insulator. This regulatory mechanism may be conserved in simple leafed species of monocot and dicot lineages and constitutes a potential key determinant in the evolution of compound leaves.