In plant meristems, dividing cells interpret positional information and translate it into patterned cell differentiation. Here we report the molecular identification of the Arabidopsis HOBBIT gene that is required for cell division and cell differentiation in meristems. We show that it encodes a homolog of the CDC27 subunit of the anaphase-promoting complex (APC). HOBBIT partially complements a yeast nuc2/cdc27 mutant. Unlike other CDC27 homologs in Arabidopsis, its transcription is cell cycle regulated. Furthermore, hobbit mutants show a reduction in DR5 :: GUS auxin reporter gene expression and accumulate the AXR3/IAA17 repressor of auxin responses. HOBBIT activity may thus couple cell division to cell differentiation by regulating cell cycle progression in the meristem or by restricting the response to differentiation cues, such as auxin, to dividing cells.