The simultaneous improvement of grain quality and yield of cereal crops is a major challenge for modern agriculture. Here we show that a rice grain yield quantitative trait locus qLGY3 encodes a MADS-domain transcription factor OsMADS1, which acts as a key downstream effector of G-protein βγ dimers. The presence of an alternatively spliced protein OsMADS1^lgy3 is shown to be associated with formation of long and slender grains, resulting in increases in both grain quality and yield potential of rice. The Gγ subunits GS3 and DEP1 interact directly with the conserved keratin-like domain of MADS transcription factors, function as cofactors to enhance OsMADS1 transcriptional activity and promote the co-operative transactivation of common target genes, thereby regulating grain size and shape. We also demonstrate that combining OsMADS1^lgy3 allele with high-yield-associated dep1-1 and gs3 alleles represents an effective strategy for simultaneously improving both the productivity and end-use quality of rice.