Limb development depends on signals from the apical ectodermal ridge and underlying mesenchyme. Fibroblast growth factor (FGF) can replace the ridge and, because Fgf4 RNA is localized to the mouse posterior ridge, we proposed that FGF4 is the endogenous ridge signal. Ridge signals control limb outgrowth and maintain the zone of polarizing activity (ZPA) at the limb posterior margin, which is important in limb pattering: a ZPA graft to limb anterior mesenchyme causes cell respecification and mirror-image duplications. Sonic hedgehog (SHH) has polarizing activity, and Shh RNA co-localizes with ZPA activity, suggesting SHH is the endogenous polarizing signal. We have investigated the molecular regulation of Fgf4 and Shh expression. We report here that Fgf4 expression in the ridge can be regulated by Shh-expressing cells. Moreover, Shh expression in mesenchyme can be activated by FGF4 in combination with retinoic acid. Once induced, Shh expression can be maintained by FGF4 alone, thus establishing a positive feedback loop between ZPA and ridge.