Plant microRNAs (miRNAs) typically mediate RNA cleavage, but examples of miRNA-mediated translational repression have also been reported. However, the functional significance of this latter process is unknown. We identified SUO in a screen for Arabidopsis mutations that increase the accumulation of the miR156-regulated gene SPL3 . suo has a loss-of-function phenotype characteristic of plants with reduced Argonaute (AGO)1 activity. An analysis of RNA and protein levels in suo mutants demonstrated that this phenotype is a consequence of a defect in miRNA-mediated translational repression; the effect of suo on vegetative phase change is attributable to a reduction in miR156/miR157 activity. SUO encodes a large protein with N-terminal bromo-adjacent homology (BAH) and transcription elongation factor S-II (TFS2N) domains and two C-terminal GW (glycine and tryptophan) repeats. SUO is present in the nucleus, and colocalizes with the processing-body component DCP1 in the cytoplasm. Our results reveal that SOU is a component of the miRNA pathway in Arabidopsis and demonstrate that translational repression is a functionally important aspect of miRNA activity in plants.