A nodulation-defective mutant of Lotus japonicus does not initiate nodule cortical cell division in response to Mesorhizobium loti, but induces root hair deformation, Nod factor-induced calcium spiking, and mycorrhization. We have shown that this mutant has a premature stop in the NSP1 (Nodulation Signalling Pathway 1) gene (Ljnsp1-1) resulting in loss of the C-terminal 23 amino acids (aa) and we recently identified another mutant in NSP1 (Ljnsp1-2) with a truncated protein of 341 aa. Additionally, we have sequenced and isolated a mutant in LjNSP2 (Ljnsp2-3) that has a premature stop codon showing a similar phenotype to the Ljnsp1 mutants, whereas another mutant (Ljnsp2-4) showed increased nodulation. Both LjNSP1 and LjNSP2 are predicted GRAS (GAI, RGA, SCR) domain transcriptional regulators. Transcript steady-state levels of LjNSP1 and LjNSP2 initially decreased and then increased following infection by M. loti. In hairy root transformations, LjNSP1 and MtNSP1 complemented both Mtnsp1-1 and Ljnsp1-1 mutants, demonstrating that these orthologous proteins have a conserved biochemical function. A Nicotiana benthamiana NSP1-like gene (NbNSP1) was shown to restore nodule formation in both Ljnsp1-1 and Mtnsp1-1 mutants, indicating that NSP1 regulators from legumes and non-legumes can propagate the Nod factor-induced signal, activating appropriate downstream targets. The L. japonicus nodules complemented with NbNSP1 contained infected cells and could fix nitrogen. However, the NbNSP1-complemented M. truncatula nodules did not fix nitrogen and contained very few bacteria released from infection threads. These observations suggest that NSP1 could also be involved in infection, bacterial release, and normal bacteroid formation in nodule cells.