Embryonic muscle growth requires a fine balance between proliferation and differentiation. In this study we have investigated how this balance is achieved during chick development. Removal of ectoderm from trunk somites results in the down-regulation of Pax-3 expression and cell division of myogenic precursors is halted. This initially leads to an up-regulation of MyoD expression and to a burst in terminal differentiation but further muscle growth is arrested. Locally applied bone morphogenetic protein-4 (BMP-4) to somites mimics the effect of the ectoderm and stimulates Pax-3 expression which eventually results in excessive muscle growth in somites. Surprisingly, BMP-4 up-regulates expression of noggin which encodes a BMP-4 antagonist. This suggests that the proliferation enhancing activity of BMP-4 can be limited via up-regulation of noggin and that myogenic cells differentiate, as an intrinsic property, when deprived of BMP-4 influence. In contrast to BMP-4, Sonic hedgehog (Shh) locally applied to somites arrests muscle growth by down-regulation of Pax-3 and immediate up-regulation of MyoD expression. Such premature muscle differentiation in somites at tongue and limb levels prevents myogenic migration and thus tongue and limb muscle are not formed. Therefore, precise limitation of differentiation, executed by proliferative and Pax-3 promoting signals, is indispensable for continuous embryonic muscle growth.