Mutations in the murine limb deformity (ld) gene disrupt differentiation of the Apical Ectodermal Ridge (AER) and patterning of distal limb structures. However, initial outgrowth of the limb bud is not affected, suggesting that early and late functions of the AER are uncoupled. Similarly, activation of the 5′ members of the HoxD gene cluster (Hoxd-11 to Hoxd-13) is not affected in ld mutant posterior limb bud mesenchyme, but the subsequent anteriorization of 5′ HoxD domains is delayed by about 12 hours and is associated with reduced levels of polarising activity. These results indicate that the ld gene products act upstream of 5′ HoxD genes during patterning of the autopod. Expression of the signalling molecule Sonic hedgehog (Shh) in the posterior limb bud mesenchyme is initiated normally, but ceases prematurely indicating a defect in maintenance of Shh by the ld mutant AER. Furthermore, no Fgf-4 transcripts are detected in the ld mutant AER, whereas Fgf-8 transcripts remain expressed. However, Shh expression can be rescued by heterospecific grafting of ld mutant posterior mesenchyme under a wild-type chicken AER. These studies show that the AER defect in ld homozygous limb buds causes disruption of the FGF-4/SHH feedback loop and support the proposed essential role for FGF-4 in maintaining Shh expression during limb pattern formation.