Conserved in a variety of evolutionarily divergent plant species, LOB DOMAIN (LBD) genes define a large, plant-specific family of largely unknown function. LBD genes have been implicated in a variety of developmental processes in plants, although to date, relatively few members have been assigned functions. LBD proteins have previously been predicted to be transcription factors, however supporting evidence has only been circumstantial. To address the biochemical function of LBD proteins, we identified a 6-bp consensus motif recognized by a wide cross-section of LBD proteins, and showed that LATERAL ORGAN BOUNDARIES (LOB), the founding member of the family, is a transcriptional activator in yeast. Thus, the LBD genes encode a novel class of DNA-binding transcription factors. Post-translational regulation of transcription factors is often crucial for control of gene expression. In our study, we demonstrate that members of the basic helix–loop–helix (bHLH) family of transcription factors are capable of interacting with LOB. The expression patterns of bHLH048 and LOB overlap at lateral organ boundaries. Interestingly, the interaction of bHLH048 with LOB results in reduced affinity of LOB for the consensus DNA motif. Thus, our studies suggest that bHLH048 post-translationally regulates the function of LOB at lateral organ boundaries.