The expression of auxin-responsive genes is regulated by the TIR1/AFB auxin receptor-dependent degradation of Aux/IAA transcriptional repressors, which interact with auxin-responsive factors (ARFs). Most of the 29 Aux/IAA genes present in Arabidopsis have not been functionally characterized to date. IAA8 appears to have a distinct function from the other Aux/IAA genes, due to its unique transcriptional response to auxin and the stability of its encoded protein. In this study, we characterized the function of Arabidopsis IAA8 in various developmental processes governed by auxin and in the transcriptional regulation of the auxin response. Transgenic plants expressing estrogen-inducible IAA8 (XVE::IAA8) exhibited significantly fewer lateral roots than the wild type, and an IAA8 loss-of-function mutant exhibited significantly more. Ectopic overexpression of IAA8 resulted in abnormal gravitropism. The strong induction of early auxin-responsive marker genes by auxin treatment was delayed by IAA8 overexpression. GFP-fusion analysis revealed that IAA8 localized not only to the nucleus, but, in contrast to other Aux/IAAs, also to the cytosol. Furthermore, we demonstrated that IAA8 interacts with TIR1, in an auxin-dependent fashion, and with ARF proteins, both in yeast and in planta. Taken together, our results show that IAA8 is involved in lateral root formation, and that this process is regulated through the interaction with the TIR1 auxin receptor and ARF transcription factors in the nucleus.