Grain size is one of the key factors determining grain yield. However, it remains largely unknown how grain size is regulated by developmental signals. Here, we report the identification and characterization of a dominant mutant big grain1 (Bg1-D) that shows an extra-large grain phenotype from our rice T-DNA insertion population. Overexpression of BG1 leads to significantly increased grain size, and the severe lines exhibit obviously perturbed gravitropism. In addition, the mutant has increased sensitivities to both auxin and N-1-naphthylphthalamic acid, an auxin transport inhibitor, whereas knockdown of BG1 results in decreased sensitivities and smaller grains. Moreover, BG1 is specifically induced by auxin treatment, preferentially expresses in the vascular tissue of culms and young panicles, and encodes a novel membrane-localized protein, strongly suggesting its role in regulating auxin transport. Consistent with this finding, the mutant has increased auxin basipetal transport and altered auxin distribution, whereas the knockdown plants have decreased auxin transport. Manipulation of BG1 in both rice and Arabidopsis can enhance plant biomass, seed weight, and yield. Taking these data together, we identify a novel positive regulator of auxin response and transport in a crop plant and demonstrate its role in regulating grain size, thus illuminating a new strategy to improve plant productivity.