Cultivated rice (Oryza sativa) was domesticated from wild rice (Oryza rufipogon), which typically displays fewer grains per panicle and longer grains than cultivated rice. In addition, wild rice has long awns, whereas cultivated rice has short awns or lacks them altogether. These changes represent critical events in rice domestication. Here, we identified a major gene, GRAIN NUMBER, GRAIN LENGTH AND AWN DEVELOPMENT1 (GAD1), that regulates those critical changes during rice domestication. GAD1 is located on chromosome 8 and is predicted to encode a small secretary signal peptide belonging to the EPIDERMAL PATTERNING FACTOR-LIKE family. A frame-shift insertion in gad1 destroyed the conserved cysteine residues of the peptide, resulting in a loss of function, and causing the increased number of grains per panicle, shorter grains, and awnless phenotype characteristic of cultivated rice. Our findings provide a useful paradigm for revealing functions of peptide signal molecules in plant development and helps elucidate the molecular basis of rice domestication.