Tillering in rice is one of the most important agronomic traits. Rice tiller development can be divided into two main processes: the formation of the axillary bud and its subsequent outgrowth. Several genes critical for bud formation in rice have been identified by genetic studies, however, their molecular function and relationships are still largely unknown. Here, we report that MONOCULM1 (MOC1) and MONOCULM 3/TILLERS ABSENT 1/STERILE AND REDUCED TILLERING 1 (MOC3/TAB1/SRT1), two vital regulators for tiller formation in rice, could physically interact to regulate tiller bud outgrowth through upregulating the expression of FLORAL ORGAN NUMBER1 (FON1), the homolog of CLAVATA1 in rice. MOC3 could directly bind to the promoter of FON1 and subsequently activate FON1 expression. MOC1 functions as a co-activator of MOC3, which did not directly bind to the FON1 promoter, but could further activate the FON1 expression in the presence of MOC3. Accordingly, FON1 is highly expressed at axillary meristems and shows remarkable decreased expression levels in moc1 and moc3 mutants. Loss-of-function mutants of FON1 exhibit normal bud formation, but deficient bud outgrowth and reduced tiller number. Collectively, these results shed lights on the joint transcriptional regulation by MOC1 and MOC3, and establish a new framework for the control of tiller bud formation and outgrowth.