The shoot meristem, a stem-cell-containing tissue initiated during plant embryogenesis, is responsible for continuous shoot organ production in postembryonic development. Although key regulatory factors including KNOX genes are responsible for stem cell maintenance in the shoot meristem, how the onset of such factors is regulated during embryogenesis is elusive. Here, we present evidence that the two KNOX genes STM and KNAT6 together with the two other regulatory genes BLR and LAS are functionally important downstream genes of CUC1 and CUC2, which are a redundant pair of genes that specify the embryonic shoot organ boundary. Combined expression of STM with any of KNAT6, BLR, and LAS can efficiently rescue the defects of shoot meristem formation and/or separation of cotyledons in cuc1cuc2 double mutants. In addition, CUC1 and CUC2 are also required for the activation of KLU, a cytochrome P450-encoding gene known to restrict organ production, and KLU counteracts STM in the promotion of meristem activity, providing a possible balancing mechanism for shoot meristem maintenance. Together, these results establish the roles for CUC1 and CUC2 in coordinating the activation of two classes of genes with opposite effects on shoot meristem activity.