Plant development is characterized by precise control of gene regulation, leading to the correct spatial and temporal tissue patterning. We have characterized the Arabidopsis jabba-1D (jba-1D) mutant, which displays multiple enlarged shoot meristems, radialized leaves, reduced gynoecia and vascular defects. The jba-1D meristem phenotypes require WUSCHEL (WUS) activity, and correlate with a dramatic increase in WUS expression levels. We demonstrate that the jba-1D phenotypes are caused by over-expression of miR166g, and require the activity of the RNase III helicase DCL1. miR166g over-expression in jba-1D plants affects the transcripts of several class III homeodomain-leucine zipper (AtHD-ZIP) family target genes. The expression of PHABULOSA (PHB), PHAVOLUTA (PHV) and CORONA (CNA) is significantly reduced in a jba-1D background, while REVOLUTA (REV) expression is elevated and ATHB8 is unchanged. In addition, we show that miR166 has a dynamic expression pattern in wild-type and jba-1D embryos. Our analysis demonstrates an indirect role for miRNAs in controlling meristem formation via regulation of WUS expression, and reveals complex regulation of the class III AtHD-ZIP gene family.