Fibroblast growth factors (FGFs) are members of a family of some 30 secreted proteins important in the regulation of cellular proliferation, migration, differentiation and survival. Here we report the identification of a novel modulator of FGF signal transduction, sef, isolated from a zebrafish embryo library through an in situ hybridization screen. The sef gene encodes a transmembrane protein, and belongs to the synexpression group that includes some of the fgf genes. Sef expression is positively regulated by FGF, and ectopic expression of sef in zebrafish or Xenopus laevis embryos specifically inhibits FGF signalling. In co-immunoprecipitation assays, the intracellular domain of Sef interacts with FGF receptors, FGFR1 and FGFR2. Injection of antisense sef morpholino oligos mimicked the phenotypes observed by ectopic fgf8 expression, suggesting that Sef is required to limit FGF signalling during development.