A non-autonomous DNA transposon in rice, nDart1, is actively transposed in the presence of an autonomous element, aDart1, under natural conditions. The nDart1-promoted gene tagging line was developed using the endogenous nDart1/aDart1 system to generate various rice mutants effectively. While the dominant mutants were occasionally isolated from the tagging line, it was unclear what causes dominant mutations. A semidominant mutant, Bushy dwarf tiller1 (Bdt1), which has the valuable agronomic traits of multiple tillering and dwarfism, was obtained from the tagging line. Bdt1 mutant carried a newly inserted nDart1 at 38-bp upstream of transcription initiation site of a non-protein-coding gene, miR156d. This insertion caused an upstream shift of the miR156d transcription initiation site and, consequently, increased the functional transcripts producing mature microRNAs. These results indicate that the total amount of miR156d is controlled not only by transcript quantity but also by transcript quality. Furthermore, transgenic lines introduced an miR156d fragment that flanked the nDart1 sequence at the 5' region, suggesting that insertion of nDart1 in the gene promoter region enhances gene expression as a cis-element. This study demonstrates the ability of nDart1 to produce gain-of-function mutants as well as further insights into the function of transposable elements in genome evolution.