Abstract Background Grain size is a key agronomic trait that is directly associated with grain yield in rice. Although several genes related to grain size in rice have been identified, our understanding of the mechanism of grain development is still limited. Results In this study, we reported the characterization of a novel seed size mutant mini seed 2 (mis2), in which the grain showed reduced length, width and thickness along with wrinkled surface. Microscopic analysis revealed that the spikelet epidermal cell size was reduced but the cell number was increased in the mis2 mutant, suggesting that MIS2 controls grain size by coordinately regulating epidermal cell size and cell number. Map-based cloning revealed that MIS2 encodes a receptor-like kinase CRINKLY4 (CR4) which showed the highest expression in developing panicles. The MIS2 protein is localized primarily on the plasma membrane along with the endosome. However, the Arg258Gln mutation located in extracellular domain in the mis2 mutant disturbed its subcellular localization. Additionally, three major haplotypes of MIS2 were identified in the japonica, indica and aus rice cultivars. The 18-bp InDel (insertion and deletion) in the 5′-UTR (untranslated region) caused different expression level of MIS2 in haplotypes. Conclusions We reported a key role of OsCR4 in controlling grain size and shape by coordinately regulating epidermal cell size and cell number. The Arg258 in the extracellular seven-repeat domain is essential for the correct subcellular behavior and function of the OsCR4 protein.