The molecular basis of the competence of the pericycle cell to initiate lateral root primordium formation is totally unknown. Here, we report that in Arabidopsis, two types of basic helix-loop-helix (bHLH) transcription factors, named PERICYCLE FACTOR TYPE-A (PFA) proteins and PERICYCLE FACTOR TYPE-B (PFB) proteins, govern the competence of pericycle cells to initiate lateral root primordium formation. Overexpression of PFA genes confers hallmark pericycle characteristics, including specific marker gene expression and auxin-induced cell division, and multiple loss-of-function mutations in PFA genes or the repression of PFB target genes results in the loss of this specific pericycle function. PFA and PFB proteins physically interact and are under mutual- and self-regulation, forming a positive feedback loop. This study unveils the transcriptional regulatory system that determines pericycle participation in lateral root initiation.