Abstract Grain size is important for yield in rice (Oryza sativa L.). Although many genes involved in grain size have been isolated, few can be used in breeding due to their interactions and phenotypic effects. Here, we describe natural variation in the granule-type quantitative trait locus GRAIN SIZE AND WEIGHT 3 (GSW3) located on chromosome 3 in wild rice (Oryza rufipogon Griff.) that encodes a GTPase-regulated protein and negatively regulates grain length, grain width, and 1,000-grain weight. The insertion of a 232-bp fragment of the genomic sequence in the wild rice, a natural allelic variant gene (GSW3), increased the expression levels and reduced the grain length and width and 1,000-grain weight. Knockout of GSW3 in the wild rice inbred line Huaye 3 increased the grain length and width and 1,000-grain weight. Introducing GSW3Huaye3 into cultivated rice line KJ01 and overexpressing GSW3Huaye3 in Huaye 3 resulted in reduced grain length and width and 1,000-grain weight, and grain size and 1,000-grain weight changes were closely related to GSW3 expression levels. GSW3 regulated the grain length and width simultaneously by promoting grain glume cell division and longitudinal and transverse cell growth. GSW3 was also involved in regulating the gibberellic acid signaling pathway and negatively regulated plant growth. Furthermore, a critical SNP in the GSW3 coding region was obviously correlated with grain size variation in a core collection of cultivated rice. This SNP resulted in an amino acid substitution from Gln to Arg at position 161 in GSW3, which reduced the grain size. Our study shows that GSW3 negatively regulates the grain shape, which could explain different grain shapes in modern cultivars and wild rice. GSW3 may also be used for breeding rice varieties with improved grain shapes and higher yield.