Gene regulation by RNA interference requires the functions of the PAZ domain protein Argonaute. In plants, mutations in ARGONAUTE1 (AGO1) are associated with distinctive developmental defects that suggest a role for microRNA (miRNA) in organ polarity. Potential targets of miRNA regulation are the homeodomain/leucine zipper genes PHABULOSA (PHB) and PHAVOLUTA (PHV). These genes are expressed in a polar fashion in leaf primordia and are required for adaxial cell fate. Here we show that a 21-nucleotide miRNA that directs cleavage of PHB/PHV messenger RNA accumulates first in the embryonic meristem, and then in the abaxial domain of the developing leaf. miRNA distribution is disrupted by mutations in AGO1, indicating that AGO1 affects the regulation of miRNA. In addition, interactions between homeodomain/leucine zipper genes and an allelic series of ago1 indicate that miRNA acts as a signal to specify leaf polarity.