Fgf-8 encodes a secreted signaling molecule mediating key roles in embryonic patterning. This study analyzes the expression pattern, regulation, and function of this growth factor in the paraxial mesoderm of the avian embryo. In the mature somite, expression of Fgf-8 is restricted to a subpopulation of myotome cells, comprising most, but not all, epaxial and hypaxial muscle precursors. Following ablation of the notochord and floor plate, Fgf-8 expression is not activated in the somites, in either the epaxial or the hypaxial domain, while ablation of the dorsal neural tube does not affect Fgf-8 expression in paraxial mesoderm. Contrary to the view that hypaxial muscle precursors are independent of regulatory influences from axial structures, these findings provide the first evidence for a regulatory influence of ventral, but not dorsal axial structures on the hypaxial muscle domain. Sonic hedgehog can substitute for the ventral neural tube and notochord in the initiation of Fgf-8 expression in the myotome. It is also shown that Fgf-8 protein leads to an increase in sclerotomal cell proliferation and enhances rib cartilage development in mature somites, whereas inhibition of Fgf signaling by SU 5402 causes deletions in developing ribs. These observations demonstrate: (1) a regulatory influence of the ventral axial organs on the hypaxial muscle compartment; (2) regulation of epaxial and hypaxial expression of Fgf-8 by Sonic hedgehog; and (3) independent regulation of Fgf-8 and MyoD in the hypaxial myotome by ventral axial organs. It is postulated that the notochord and ventral neural tube influence hypaxial expression of Fgf-8 in the myotome and that, in turn, Fgf-8 has a functional role in rib formation.