Plant shoot development depends on the perpetuation of a group of undifferentiated cells in the shoot apical meristem (SAM). In the Petunia mutant hairy meristem (ham), shoot meristems differentiate postembryonically as continuations of the subtending stem. HAM encodes a putative transcription factor of the GRAS family, which acts non-cell-autonomously from L3-derived tissue of lateral organ primordia and stem provasculature. HAM acts in parallel with TERMINATOR (PhWUSCHEL) and is required for continued cellular response to TERMINATOR and SHOOTMERISTEMLESS (PhSTM). This reveals a novel mechanism by which signals from differentiating tissues extrinsically control stem cell fate in the shoot apex.