To identify the molecular mechanisms underlying carbohydrate allocation to storage processes, we have isolated mutants in which the sugar induction of starch biosynthetic gene expression was impaired. Here we describe the IMPAIRED SUCROSE INDUCTION1 (ISI1) gene, which encodes a highly conserved plant-specific protein with structural similarities to Arm repeat proteins. ISI1 is predominantly expressed in the phloem of leaves following the sink-to-source transition during leaf development, but is also sugar-inducible in mesophyll cells. Soil-grown isi1 mutants show reduced plant growth and seed set compared to wild-type Arabidopsis. This growth reduction is not due to reduced carbohydrate availability or a defect in sucrose export from mature leaves, suggesting that isi1 mutant plants do not utilize available carbohydrate resources efficiently. ISI1 interacts synergistically with, but is genetically distinct from, the abscisic acid (ABA) signalling pathway controlling sugar responses via ABI4. Our data show that ISI1 couples the availability of carbohydrates to the control of sugar-responsive gene expression and plant growth.