Cell differentiation, an essential process for multicellular organism development, is precisely regulated by a series of signals. The plant-specific transcription factor HD-Zip III plays critical roles in the process. Here, we review the HD-Zip III gene cluster and structure features and discuss the main functions of HD-Zip III genes during embryogenesis, apical meristem formation, leaf polarity and vascular differentiation. We summarize the regulation of HD-Zip III genes at different levels and discuss the relationship between HD-Zip III function and land plant evolution.