© 2015 American Society of Plant Biologists. All rights reserved. In Arabidopsis thaliana, the α/β-fold hydrolase KARRIKIN INSENSITIVE2 (KAI2) is essential for normal seed germination, seedling development, and leaf morphogenesis, as well as for responses to karrikins. KAI2 is a paralog of DWARF14 (D14), the proposed strigolactone receptor, but the evolutionary timing of functional divergence between the KAI2 and D14 clades has not been established. By swapping gene promoters, we show that Arabidopsis KAI2 and D14 proteins are functionally distinct. We show that the catalytic serine of KAI2 is essential for function in plants and for biochemical activity in vitro. We identified two KAI2 homologs from Selaginella moellendorffii and two from Marchantia polymorpha. One from each species could hydrolyze the strigolactone analog GR24 in vitro, but when tested for their ability to complement Arabidopsis d14 and kai2 mutants, neither of these homologs was effective. However, the second KAI2 homolog from S. moellendorffii was able to complement the seedling and leaf development phenotypes of Arabidopsis kai2. This homolog could not transduce signals from exogenous karrikins, strigolactone analogs, or carlactone, but its activity did depend on the conserved catalytic serine. We conclude that KAI2, and most likely the endogenous signal to which it responds, has been conserved since the divergence of lycophytes and angiosperm lineages, despite their major developmental and morphogenic differences.