Recently, a new family of genes, homologues of the Drosophila segment polarity gene hedgehog, has been cloned in vertebrates. One of them, Sonic hedgehog, is expressed in tissues that are known to be inductive centres for patterning early embryos, implicating Sonic hedgehog as an important signal in development. Functional experiments have demonstrated that Sonic hedgehog acts as a signalling molecule in patterning the anterior-posterior axis of the limb. By misexpression of Sonic hedgehog we show that Sonic hedgehog induces expression of Hoxd genes, known to be involved in patterning of the anterior-posterior axis of the limb, and Bmp-2, which might act as a secondary signal. We also demonstrate that Sonic hedgehog is not sufficient for these inductions. In fact, a signal from the mesoderm, Sonic hedgehog, and a signal from the ectoderm, Fgf-4, are required for the induction of Hoxd genes and Bmp-2.