The balance between proliferation and differentiation in the plant shoot apical meristem is controlled by regulatory loops involving the phytohormone cytokinin and stem cell identity genes. Concurrently, cellular differentiation in the developing shoot is coordinated with the environmental and developmental status of plastids within those cells. Here we employ an Arabidopsis thaliana mutant exhibiting constitutive plastid osmotic stress to investigate the molecular and genetic pathways connecting plastid osmotic stress with cell differentiation at the shoot apex. msl2 msl3 mutants exhibit dramatically enlarged and deformed plastids in the shoot apical meristem, and develop a mass of callus tissue at the shoot apex. Callus production in this mutant requires the cytokinin receptor AHK2 and is characterized by increased cytokinin levels, down-regulation of cytokinin signaling inhibitors ARR7 and ARR15, and induction of the stem cell identity gene WUSCHEL. Furthermore, plastid stress-induced apical callus production requires elevated plastidic ROS, ABA biosynthesis, the retrograde signaling protein GUN1, and ABI4. These results are consistent with a model wherein the cytokinin/WUS pathway and retrograde signaling control cell differentiation at the shoot apex.