We have used the mouse developing tooth germ as a model system to explore the transmission of Sonic hedgehog (Shh) signal in the induction of Patched (Ptc). In the early developing molar tooth germ, Shh is expressed in the dental epithelium, and the transcripts of Shh downstream target genes Ptc and Gli1 are expressed in dental epithelium as well as adjacent mesenchymal tissue. The homeobox gene Msx1 is also expressed in the dental mesenchyme of the molar tooth germ at this time. We show here that the expression of Ptc, but not Gli1, was downregulated in the dental mesenchyme of Msx1 mutants. In wild-type E11.0 molar tooth mesenchyme SHH-soaked beads induced the expression of Ptc and Gli1. However, in Msx1 mutant dental mesenchyme SHH-soaked beads were able to induce Gli1 but failed to induce Ptc expression, indicating a requirement for Msx1 in the induction of Ptc by SHH. Moreover, we show that another signaling molecule, BMP4, was able to induce Ptc expression in wild-type dental mesenchyme, but induced a distinct expression pattern of Ptc in the Msx1 mutant molar mesenchyme. We conclude that in the context of the tooth germ Msx1 is a component of the Shh signaling pathway that leads to Ptc induction. Our results also suggest that the precise pattern of Ptc expression in the prospective tooth-forming region is controlled and coordinated by at least two inductive signaling pathways.