Heterophylly is regard as an important adaptive mechanism in response to different environments within plants. However, the genetic mechanisms responsible for heterophylly in woody plants are still poorly understood. Herein, the divergence of heterophyllous leaves was investigated at morphogenesis and using microdissection and physiological indexes in paper mulberry, and the genetic basis of heterophylly was further revealed combined with genome-wide association study (GWAS), transcriptome analysis and weighted gene coexpression network analysis (WGCNA). Our results revealed that the flavonoid content and antioxidant activity increased gradually from the entire leaf to the palmatisect leaf, while the hormone content and net photosynthetic rate decreased. Through GWAS and transcriptome analysis, a total of 98 candidate genes and 2338 differentially expressed genes associated with heterophylly were identified. Importantly, we uncovered critical variations in the candidate genes Bp07g0981 (WOX) and Bp07g0920 (HHO), along with significant differences in haplotypes and expression levels among heterophyllous leaves. Our results also suggested that the genes involved in hormone signaling pathways, antioxidant activity, and flavonoid metabolism might be closely related to the heterophylly of paper mulberry, which could account for the physiological data. Indeed, CR-wox mutant lines showed significant changes in leaf phenotypes, and differential expression profile analysis also highlighted the expression of genes related to phytohormones and transcription factors. Together, the genetic variations and candidate genes detected in this study provide novel insights into the genetic mechanism of heterophylly, and would improve the understanding of eco-adaptability in heterophyllous woody plants.