Many studies have shown a role of retinoid signalling in neurite outgrowth in vitro, and that the retinoic acid receptor (RAR) beta2 is critical for this process. We show here that RARbeta2 is expressed predominantly in dorsal root ganglia (DRG) neuronal subtypes that express neurofilament (NF) 200 and calcitonin gene-related peptide (CGRP), and that these neurons extend neurites in response to RA. We demonstrate that retinoid signalling has a role in neurite outgrowth in vivo, by showing that in a peripheral nerve crush model there is less neurite outgrowth from RARbeta null DRG compared to wild-type. We identify sonic hedgehog (Shh) as a downstream target of the RARbeta2 signalling pathway as it is expressed in the injured DRG of wild-type but not RARbeta null mice. This regulation is direct as when RARbeta2 is overexpressed in adult motoneurons Shh is induced in them. Finally we show that Shh alone cannot induce neurite outgrowth but potentiates RARbeta2 signalling in this process.