Despite its relevance for agricultural production, environmental stress-induced growth inhibition, which is responsible for significant yield reductions, is only poorly understood. Here, we investigated the molecular mechanisms underlying cell cycle inhibition in young proliferating leaves of the model plant Arabidopsis thaliana when subjected to mild osmotic stress. A detailed cellular analysis demonstrated that as soon as osmotic stress is sensed, cell cycle progression rapidly arrests, but cells are kept in a latent ambivalent state allowing a quick recovery (pause). Remarkably, cell cycle arrest coincides with an increase in 1-aminocyclopropane-1-carboxylate levels and the activation of ethylene signaling. Our work showed that ethylene acts on cell cycle progression via inhibition of cyclin-dependent kinase A activity independently of EIN3 transcriptional control. When the stress persists, cells exit the mitotic cell cycle and initiate the differentiation process (stop). This stop is reflected by early endoreduplication onset, in a process independent of ethylene. Nonetheless, the potential to partially recover the decreased cell numbers remains due to the activity of meristemoids. Together, these data present a conceptual framework to understand how environmental stress reduces plant growth.