This paper describes the characterization of Oshox1, a cDNA clone from rice encoding a member of the homeodomain—leucine zipper (HD‐Zip) class of putative transcription factors. Oshox1 maps to chromosome 10 and belongs to a family of related rice genes. Two‐hybrid assays showed that Oshox1 protein can homodimerize, but can also form heterodimers with an Arabidopsis HD‐Zip protein. This suggests that protein—protein interactions may also occur between different HD‐Zip proteins in rice, which would provide enormous versatility for generating specific gene‐control mechanisms. Oshox1 mRNA could be detected in various rice tissues at different developmental stages, with highest levels in embryos, shoots of seedlings, and leaves of mature plants. Transgenic expression of Oshox1 in Arabidopsis retarded growth and affected leaf size and shape, indicative of a role as developmental regulator. In vitro and in vivo DNA‐binding studies revealed that Oshox1 interacts with the pseudopalindromic sequence CAAT(C/G)ATTG, confirming that the protein represents a transcription factor. Oshox1 was found to repress reporter gene activity in rice suspension cells, most likely by a mechanism of active transcriptional repression. Repression was strictly dependent on the presence of upstream Oshox1 binding sites in the reporter gene constructs and a function of the N‐terminal region of Oshox1, preceding the homeodomain.