Based on recent data, a new view is emerging that vertebrate Dachshund (Dach) proteins are components of Six1/6 transcription factor-dependent signaling cascades. Although Drosophila data strongly suggest a tight link between Dpp signaling and the Dachshund gene, a functional relationship between vertebrate Dach and BMP signaling remains undemonstrated. We report that chick Dach1 interacts with the Smad complex and the corepressor mouse Sin3a, thereby acting as a repressor of BMP-mediated transcriptional control. In the limb, this antagonistic action regulates the formation of the apical ectodermal ridge (AER) in both the mesenchyme and the AER itself, and also controls pattern formation along the proximodistal axis of the limb. Our data introduce a new paradigm of BMP antagonism during limb development mediated by Dach1, which is now proven to function in different signaling cascades with distinct interacting partners.