The formation of leaves and other lateral organs in plants depends on the proper specification of adaxial-abaxial (upper-lower) polarity. KANADI1 (KAN1), a member of the GARP family of transcription factors, is a key regulator of abaxial identity, leaf growth, and meristem formation in Arabidopsis thaliana. Here, we demonstrate that the Myb-like domain in KAN1 binds the 6-bp motif GNATA(A/T) and that this motif alone is sufficient to squelch transcription of a linked reporter in vivo. In addition, we report that KAN1 acts as a transcriptional repressor. Among its targets are genes involved in auxin biosynthesis, auxin transport, and auxin response. Furthermore, we find that the adaxializing HD-ZIPIII transcription factor REVOLUTA has opposing effects on multiple components of the auxin pathway. We hypothesize that HD-ZIPIII and KANADI transcription factors pattern auxin accumulation and responsiveness in the embryo. Specifically, we propose the opposing actions of KANADI and HD-ZIPIII factors on cotyledon formation (KANADI represses and HD-ZIPIII promotes cotyledon formation) occur through their opposing actions on genes acting at multiple steps in the auxin pathway.