Plants differ from most animals in their retained ability to initiate new cycles of growth and development, which relies on the establishment and activity of branch meristems. In seed plants, branching is achieved by axillary meristems, which are established in the axil of each leaf base and develop into lateral branches. Research into axillary meristem initiation has identified transcription factors and phytohormones as key regulators. Based on these findings, a mechanistic framework for understanding axillary meristem initiation has emerged. Taking recent research into account, we discuss mechanisms underlying stem cell fate regulation that enable axillary meristem formation.