Understanding the genetic mechanism underlying rice leaf-shape development is crucial for optimizing rice configuration and achieving high yields; however, little is known about leaf abaxial curling. We isolated a rice transferred DNA (T-DNA) insertion mutant, BY240, which exhibited an abaxial leaf curling phenotype that co-segregated with the inserted T-DNA. The T-DNA was inserted in the promoter of a novel gene, ACL1 (Abaxially Curled Leaf 1), and led to overexpression of this gene in BY240. Overexpression of ACL1 in wild-type rice also resulted in abaxial leaf curling. ACL1 encodes a protein of 116 amino acids with no known conserved functional domains. Overexpression of ACL2, the only homolog of ACL1 in rice, also induced abaxial leaf curling. RT-PCR analysis revealed high expressions of ACLs in leaf sheaths and leaf blades, suggesting a role for these genes in leaf development. In situ hybridization revealed non-tissue-specific expression of the ACLs in the shoot apical meristem, leaf primordium, and young leaf. Histological analysis showed increased number and exaggeration of bulliform cells and expansion of epidermal cells in the leaves of BY240, which caused developmental discoordination of the abaxial and adaxial sides, resulting in abaxially curled leaves. These results revealed an important mechanism in rice leaf development and provided the genetic basis for agricultural improvement.