Plant leaves are diverse in their morphology, reflecting to a large degree the plant diversity in the natural environment. How different leaf morphology is determined is not yet understood. The leguminous plant Medicago truncatula exhibits dissected leaves with three leaflets at the tip. We show that development of the trifoliate leaves is determined by the Cys(2)His(2) zinc finger transcription factor PALM1. Loss-of-function mutants of PALM1 develop dissected leaves with five leaflets clustered at the tip. We demonstrate that PALM1 binds a specific promoter sequence and down-regulates the expression of the M. truncatula LEAFY/UNIFOLIATA orthologue SINGLE LEAFLET1 (SGL1), encoding an indeterminacy factor necessary for leaflet initiation. Our data indicate that SGL1 is required for leaflet proliferation in the palm1 mutant. Interestingly, ectopic expression of PALM1 effectively suppresses the lobed leaf phenotype from overexpression of a class 1 KNOTTED1-like homeobox protein in Arabidopsis plants. Taken together, our results show that PALM1 acts as a determinacy factor, regulates the spatial-temporal expression of SGL1 during leaf morphogenesis and together with the LEAFY/UNIFOLIATA orthologue plays an important role in orchestrating the compound leaf morphology in M. truncatula.