The developing limb serves as a paradigm for studying pattern formation and morphogenetic cell death. Here, we show that conditional deletion of N-Myc (Mycn) in the developing mouse limb leads to uniformly small skeletal elements and profound soft-tissue syndactyly. The small skeletal elements are associated with decreased proliferation of limb bud mesenchyme and small cartilaginous condensations, and syndactyly is associated with a complete absence of interdigital cell death. Although Myc family proteins have pro-apoptotic activity, N-Myc is not expressed in interdigital cells undergoing programmed cell death. We provide evidence indicating that the lack of interdigital cell death and associated syndactyly is related to an absence of interdigital cells marked by expression of Fgfr2 and Msx2. Thus, instead of directly regulating interdigital cell death, we propose that N-Myc is required for the proper generation of undifferentiated mesenchymal cells that become localized to interdigital regions and trigger digit separation when eliminated by programmed cell death. Our results provide new insight into mechanisms that control limb development and suggest that defects in the formation of N-Myc-dependent interdigital tissue may be a root cause of common syndromic forms of syndactyly.