In land plants comparative genomics has revealed that members of basal lineages share a common set of transcription factors with the derived flowering plants, despite sharing few homologous structures. The plant hormone auxin has been implicated in many facets of development in both basal and derived lineages of land plants. We functionally characterized the auxin transcriptional response machinery in the liverwort Marchantia polymorpha, a member of the basal lineage of extant land plants. All components known from flowering plant systems are present in M. polymorpha, but they exist as single orthologs: a single MpTOPLESS (TPL) corepressor, a single MpTRANSPORT INHIBITOR RESPONSE 1 auxin receptor, single orthologs of each class of AUXIN RESPONSE FACTOR (ARF; MpARF1, MpARF2, MpARF3), and a single negative regulator AUXIN/INDOLE-3-ACETIC ACID (MpIAA). Phylogenetic analyses suggest this simple system is the ancestral condition for land plants. We experimentally demonstrate that these genes act in an auxin response pathway — chimeric fusions of the MpTPL corepressor with heterodimerization domains of MpARF1, MpARF2, or their negative regulator, MpIAA, generate auxin insensitive plants that lack the capacity to pattern and transition into mature stages of development. Our results indicate auxin mediated transcriptional regulation acts as a facilitator of branching, differentiation and growth, rather than acting to determine or specify tissues during the haploid stage of the M. polymorpha life cycle. We hypothesize that the ancestral role of auxin is to modulate a balance of differentiated and pluri- or totipotent cell states, whose fates are determined by interactions with combinations of unrelated transcription factors.