Continuous growth and development in plants are accomplished by meristems, groups of undifferentiated cells that persist as stem cells and initiate organs. While the structures of the apical and floral meristems in dicotyledonous plants have been well described, little is known about the underlying molecular mechanisms controlling cell proliferation and differentiation in these structures. We have shown previously that the CLAVATA1 (CLV1) gene in Arabidopsis encodes a receptor kinase-like protein that controls the size of the apical and floral meristems. Here, we show that KAPP, a gene encoding a kinase-associated protein phosphatase, is expressed in apical and young floral meristems, along with CLV1. Overexpression of KAPP mimics the clv1 mutant phenotype. Furthermore, CLV1 has kinase activity: it phosphorylates both itself and KAPP. Finally, KAPP binds and dephosphorylates CLV1. We present a model where KAPP functions as a negative regulator of the CLAVATA1 signal transduction pathway.