Induction of pluripotent cells termed callus by auxin represents a typical cell fate change required for plant in vitro regeneration; however, the molecular control of auxin-induced callus formation is largely elusive. We previously identified four Arabidopsis auxin-inducible Lateral Organ Boundaries Domain (LBD) transcription factors that govern callus formation. Here, we report that Arabidopsis basic region/leucine zipper motif 59 (AtbZIP59) transcription factor forms complexes with LBDs to direct auxin-induced callus formation. We show that auxin stabilizes AtbZIP59 and enhances its interaction with LBD, and that disruption of AtbZIP59 dampens auxin-induced callus formation whereas overexpression of AtbZIP59 triggers autonomous callus formation. AtbZIP59–LBD16 directly targets a FAD-binding Berberine (FAD-BD) gene and promotes its transcription, which contributes to callus formation. These findings define the AtbZIP59–LBD complex as a critical regulator of auxin-induced cell fate change during callus formation, which provides a new insight into the molecular regulation of plant regeneration and possible developmental programs.