Lateral root formation, a developmental process under the control of the plant hormone auxin, is a major determinant of root architecture, and defines the ability of a plant to acquire nutrients and water. The LATERAL ORGAN BOUNDARIES DOMAIN/ASYMMETRIC LEAVES2-LIKE (LBD/ASL) proteins play an important role in the lateral organ development of plants, including lateral root formation. However, their downstream components and signalling mechanisms are largely unknown. Here, we show that auxin-responsive LBD18/ASL20 acts as a specific DNA-binding transcriptional activator that directly regulates EXPANSIN14 (EXP14), a gene encoding a cell wall-loosening factor that promotes lateral root emergence in Arabidopsis thaliana. We showed that LBD18 possesses transcription-activating function in both yeast and Arabidopsis protoplasts. We isolated putative LBD18 target genes by microarray analysis, and identified EXP14 as a direct target of LBD18. Dexamethasone-induced expression of LBD18 under the CaMV 35S promoter in transgenic Arabidopsis resulted in enhanced expression of GUS fused to the EXP14 promoter in primordium and overlaying tissues. In contrast, GUS expression under the EXP14 promoter in the lbd18 mutant background was significantly reduced in the same tissues. Experiments using a variety of molecular techniques demonstrated that LBD18 activates EXP14 by directly binding to a specific promoter element in vitro and in vivo. Overexpression of EXP14 in Arabidopsis resulted in the stimulation of emerged lateral roots, but not primordia, whereas EXP14 loss-of-function plants had reduced auxin-stimulated lateral root formation. This study revealed the molecular function of LBD18 as a specific DNA-binding transcription factor that activates EXP14 expression by directly binding to its promoter.