A key event in the domestication and breeding of the oil palm Elaeis guineensis was loss of the thick coconut-like shell surrounding the kernel. Modern E. guineensis has three fruit forms, dura (thick-shelled), pisifera (shell-less) and tenera (thin-shelled), a hybrid between dura and pisifera. The pisifera palm is usually female-sterile. The tenera palm yields far more oil than dura, and is the basis for commercial palm oil production in all of southeast Asia. Here we describe the mapping and identification of the SHELL gene responsible for the different fruit forms. Using homozygosity mapping by sequencing, we found two independent mutations in the DNA-binding domain of a homologue of the MADS-box gene SEEDSTICK (STK, also known as AGAMOUS-LIKE 11), which controls ovule identity and seed development in Arabidopsis. The SHELL gene is responsible for the tenera phenotype in both cultivated and wild palms from sub-Saharan Africa, and our findings provide a genetic explanation for the single gene hybrid vigour (or heterosis) attributed to SHELL, via heterodimerization. This gene mutation explains the single most important economic trait in oil palm, and has implications for the competing interests of global edible oil production, biofuels and rainforest conservation.