Megf7/Lrp4 is a member of the functionally diverse low-density lipoprotein receptor gene family, a class of ancient and highly conserved cell surface receptors with broad functions in cargo transport and cellular signaling. To gain insight into the as yet unknown biological role of Megf7/Lrp4, we have disrupted the gene in mice. Homozygous Megf7-deficient mice are growth-retarded, with fully penetrant polysyndactyly in their fore and hind limbs, and partially penetrant abnormalities of tooth development. The reason for this developmental abnormality is apparent as early as embryonic day 9.5 when the apical ectodermal ridge (AER), the principal site of Megf7 expression at the distal edge of the embryonic limb bud, forms abnormally in the absence of Megf7. Ectopic expression and aberrant signaling of several molecules involved in limb patterning, including Fgf8, Shh, Bmp2, Bmp4 and Wnt7a, as well as the Wnt- and Bmp-responsive transcription factors Lmx1b and Msx1, result in reduced apoptosis and symmetrical dorsal and ventral expansions of the AER. Abnormal signaling from the AER precedes ectopic chondrocyte condensation and subsequent fusion and duplication of digits in the Megf7 knockouts. Megf7 can antagonize canonical Wnt signaling in vitro. Taken together, these findings are consistent with a role of Megf7 as a modulator of cellular signaling pathways involving Wnts, Bmps, Fgfs and Shh. A similar autosomal recessive defect may also occur in man, where polysyndactyly, in combination with craniofacial abnormalities, is also part of a common genetic syndrome.