Our previous surgical manipulations have shown that the target ectoderm is necessary for the initial formation of one of the major cutaneous nerves in the embryonic chick limb (Honig, M.G., Camilli, S.J., Xue, Q.S., 2004. Ectoderm removal prevents cutaneous nerve formation and perturbs sensory axon growth in the chick hindlimb. Dev. Biol. 266, 27-42.). Moreover, the target ectoderm is required during a critical time period, at approximately St. 24, when those axons are about to diverge from the hindlimb plexus. To elucidate the underlying mechanisms, here we examined the effects of removing the ectoderm at St. 24 on a variety of molecules expressed within the limb. We find that, while ectoderm removal is accompanied by changes in the expression of Lmx1, fibronectin, EphA7, cDermo-1, and in the complement of muscle cells, these changes do not account for the cutaneous nerve deficit. In contrast, an upregulation of PNA-binding sites and a downregulation of Bmp4 appear to be associated with this nerve deficit. Exogenous BMP4 reversed the effect of ectoderm removal on cutaneous nerve formation, but did not act as a chemoattractant. Our results suggest that BMP4, together with permissive and repulsive molecules that growing cutaneous axons encounter in the local environment and with signaling molecules, originating from and/or dependent on the ectoderm, work in concert to ensure proper cutaneous nerve formation.