Reduction in seed shattering was an important phenotypic change during cereal domestication. Here we show that a simple morphological change in rice panicle shape, controlled by the SPR3 locus, has a large impact on seed-shedding and pollinating behaviors. In the wild genetic background of rice, we found that plants with a cultivated-like type of closed panicle had significantly reduced seed shedding through seed retention. In addition, the long awns in closed panicles disturbed the free exposure of anthers and stigmas on the flowering spikelets, resulting in a significant reduction of the outcrossing rate. We localized the SPR3 locus to a 9.3-kb genomic region, and our complementation tests suggest that this region regulates the liguleless gene (OsLG1). Sequencing analysis identified reduced nucleotide diversity and a selective sweep at the SPR3 locus in cultivated rice. Our results suggest that a closed panicle was a selected trait during rice domestication.