In heterophyllous plants, leaf shape shows remarkable plasticity in response to environmental conditions. However, transgenic studies of heterophylly are lacking and the molecular mechanism remains unclear. Here, we cloned the KNOTTED1-LIKE HOMEOBOX family gene SHOOT MERISTEMLESS (STM) from the heterophyllous plant Hygrophila difformis (Acanthaceae). We used molecular, morphogenetic, and biochemical tools to explore its functions in heterophylly. HdSTM was detected in different organs of H. difformis, and its expression changed with environmental conditions. Heterologous, ectopic expression of HdSTM in Arabidopsis (Arabidopsis thaliana) increased leaf complexity and CUP-SHAPED COTYLEDON (CUC) transcript levels. However, overexpression of HdSTM in H. difformis did not induce the drastic leaf change in the terrestrial condition. Overexpression of HdSTM in H. difformis induced quick leaf variations in submergence, while knockdown of HdSTM led to disturbed leaf development and weakened heterophylly in H. difformis. HdCUC3 had the same spatiotemporal expression pattern as HdSTM. Biochemical analysis revealed a physical interaction between HdSTM and HdCUC3. Our results provide genetic evidence that HdSTM is involved in regulating heterophylly in H. difformis.