We describe here the temporal and spatial pattern of expression of Evx-1, a murine homolog of the Drosophila even-skipped gene, in the developing limb bud. Evx-1 RNA is first detected in distal limb (progress zone) mesenchyme shortly after the formation of the apical ectodermal ridge. The level of Evx-1 RNA increases during the next 24 hours of development, and then decreases in the subsequent 24 hours, such that by the time the ridge regresses Evx-1 RNA is undetectable. At all these stages, Evx-1 RNA is localized primarily to the posterior distal mesenchyme, in the region immediately underlying that portion of the ridge in which the Fgf-4 gene is expressed. Using an in vitro culture system, we show that the ridge is required for both the induction and maintenance of Evx-1 expression in the distal mesenchyme. We also demonstrate that in the absence of the ridge, FGF-4, as well as other FGF proteins, can induce Evx-1 expression in the limb bud. However, this effect appears to be indirect, since it can be blocked by an inhibitor of protein synthesis. Additional studies demonstrate that the effect of FGF-4 on Evx-1 expression is modulated by BMP-2. These data serve to identify Evx-1 as a downstream gene in the FGF signal transduction pathway in the limb.