GH3 proteins control auxin homeostasis by inactivating excess auxin as conjugates of amino acids and sugars and thereby controlling cellular bioactive auxin. Since auxin regulates many aspects of plant growth and development, regulated expression of these genes offers a mechanism to control various developmental processes. OsMGH3/OsGH3-8 is expressed abundantly in rice florets and is regulated by two related and redundant transcription factors, OsMADS1 and OsMADS6, but its contribution to flower development is not known. We functionally characterize OsMGH3 by overexpression and knock-down analysis and show a partial overlap in these phenotypes with that of mutants in OsMADS1 and OsMADS6. The overexpression of OsMGH3 during the vegetative phase affects the overall plant architecture, whereas its inflorescence-specific overexpression creates short panicles with reduced branching, resembling in part the effects of OsMADS1 overexpression. In contrast, the down-regulation of endogenous OsMGH3 caused phenotypes consistent with auxin overproduction or activated signaling, such as ectopic rooting from aerial nodes. Florets in OsMGH3 knock-down plants were affected in carpel development and pollen viability, both of which reduced fertility. Some of these floret phenotypes are similar to osmads6 mutants. Taken together, we provide evidence for the functional significance of auxin homeostasis and its transcriptional regulation during rice panicle branching and floret organ development.