Background ARGONAUTE 1 (AGO1) proteins can recruit small RNAs to regulate gene expression, involving several growth and development processes in Arabidopsis. Rice genome contains four AGO1 genes, OsAGO1a to OsAGO1d. However, the regulatory functions to rice growth and development of each AGO1 gene are still unknown. Results We obtained overexpression and RNAi transgenic lines of each OsAGO1 gene. However, only up- and down-regulation of OsAGO1b caused multiple abnormal phenotypic changes in rice, indicating that OsAGO1b is the key player in rice growth and organ development compared with other three OsAGO1s. qRT-PCR assays showed that OsAGO1b was almost unanimously expressed in leaves at different developmental stages, and strongly expressed in spikelets at S1 to S3 stages. OsAGO1b is a typical AGO protein, and co-localized in both the nucleus and cytoplasm simultaneously. Overexpression of OsAGO1b caused adaxially rolled leaves and a series of abnormal phenotypes, such as the reduced tiller number and plant height. Knockdown lines of OsAGO1b showed almost normal leaves, but the seed setting percentage was significantly reduced accompanied by the disturbed anther patterning and reduced pollen fertility. Further anatomical observation revealed that OsAGO1b overexpression plants showed the partially defective development of sclerenchymatous cells on the abaxial side of leaves. In situ hybridization showed OsAGO1b mRNA was uniformly accumulated in P1 to P3 primordia without polarity property, suggesting OsAGO1b did not regulate the adaxial-abaxial polarity development directly. The expression levels of several genes related to leaf polarity development and vascular bundle differentiation were observably changed. Notably, the accumulation of miR166 and TAS3-siRNA was decreased, and their targeted OSHBs and OsARFs were significantly up-regulated. The mRNA distribution patterns of OSHB3 and OsARF4 in leaves remained almost unchanged between ZH11 and OsAGO1b overexpression lines, but their expression levels were enhanced at the regions of vascular bundles and sclerenchymatous cell differentiation. Conclusions In summary, we demonstrated OsAGO1b is the leading player among four OsAGO1s in rice growth and development. We propose that OsAGO1b may regulate the abaxial sclerenchymatous cell differentiation by affecting the expression of OSHBs in rice.