Mechanisms through which the evolution of gene regulation causes morphological diversity are largely unclear. The tremendous shape variation among plant leaves offers attractive opportunities to address this question. In cruciferous plants, the REDUCED COMPLEXITY (RCO) homeodomain protein evolved via gene duplication and acquired a novel expression domain that contributed to leaf shape diversity. However, the molecular pathways through which RCO regulates leaf growth are unknown. A key question is to identify genome-wide transcriptional targets of RCO and the DNA sequences to which RCO binds. We investigate this question using Cardamine hirsuta, which has complex leaves, and its relative Arabidopsis thaliana, which evolved simple leaves through loss of RCO. We demonstrate that RCO directly regulates genes controlling homeostasis of the hormone cytokinin to repress growth at the leaf base. Elevating cytokinin signaling in the RCO expression domain is sufficient to both transform A. thaliana simple leaves into complex ones and partially bypass the requirement for RCO in C. hirsuta complex leaf development. We also identify RCO as its own target gene. RCO directly represses its own transcription via an array of low-affinity binding sites, which evolved after RCO duplicated from its progenitor sequence. This autorepression is required to limit RCO expression. Thus, evolution of low-affinity binding sites created a negative autoregulatory loop that facilitated leaf shape evolution by defining RCO expression and fine-tuning cytokinin activity. In summary, we identify a transcriptional mechanism through which conflicts between novelty and pleiotropy are resolved during evolution and lead to morphological differences between species.