Nodulation is a form of de novo organogenesis that occurs mainly in legumes. During early nodule development, the host plant root is infected by rhizobia that induce dedifferentiation of some cortical cells, which then proliferate to form the symbiotic root nodule primordium. Two classic phytohormones, cytokinin and auxin, play essential roles in diverse aspects of cell proliferation and differentiation. Although recent genetic studies have established how activation of cytokinin signaling is crucial to the control of cortical cell differentiation, the physiological pathways through which auxin might act in nodule development are poorly characterized. Here, we report the detailed patterns of auxin accumulation during nodule development in Lotus japonicus. Our analyses showed that auxin predominantly accumulates in dividing cortical cells and that NODULE INCEPTION, a key transcription factor in nodule development, positively regulates this accumulation. Additionally, we found that auxin accumulation is inhibited by a systemic negative regulatory mechanism termed autoregulation of nodulation (AON). Analysis of the constitutive activation of LjCLE-RS genes, which encode putative root-derived signals that function in AON, in combination with the determination of auxin accumulation patterns in proliferating cortical cells, indicated that activation of LjCLE-RS genes blocks the progress of further cortical cell division, probably through controlling auxin accumulation. Our data provide evidence for the existence of a novel fine-tuning mechanism that controls nodule development in a cortical cell stage-dependent manner.