We have identified a gene, Lateral Root Development 3 (LRD3), that is important for maintaining a balance between primary and lateral root growth. The lrd3 mutant has decreased primary root growth and increased lateral root growth. We determined that the LRD3 gene encodes a LIM-domain protein of unknown function. LRD3 is expressed only in the phloem companion cells, which suggested a role in phloem function. Indeed, while phloem loading and export from the shoot appear to be normal, delivery of phloem to the primary root tip is limited severely in young seedlings. Abnormalities in phloem morphology in these seedlings indicate that LRD3 is essential for correct early phloem development. There is a subsequent spontaneous recovery of normal phloem morphology, which is correlated tightly with increased phloem delivery and growth of the primary root. The LRD3 gene is one of very few genes described to affect phloem development, and the only one that is specific to early phloem development. Continuous growth on auxin also leads to recovery of phloem development and function in lrd3, which demonstrates that auxin plays a key role in early phloem development. The root system architecture and the pattern of phloem allocation in the lrd3 root system suggested that there may be regulated mechanisms for selectively supporting certain lateral roots when the primary root is compromised. Therefore, this study provides new insights into phloem-mediated resource allocation and its effects on plant root system architecture.