Interaction of ectoderm and underlying mesoderm is essential for normal vertebrate limb morphogenesis. One of the functions of limb bud ectoderm is its influence on the composition of extracellular matrix in subectodermal mesoderm, which in turn participates in morphogenesis of this region of the limb. This matrix is highly enriched in hyaluronan, even at the time when the level of hyaluronan in the chondrogenic and myogenic regions of the limb decreases, due to secretion of a stimulatory factor by the ectoderm. In this study we show that limb bud ectoderm not only stimulates hyaluronan synthesis but induces formation of large hyaluronan-dependent, pericellular matrices around cultured limb bud mesodermal cells. The ectodermal activity is mimicked in great part by fibroblast growth factor-2 and transforming growth factor-beta, and antibodies to these proteins inhibit induction of mesodermal pericellular matrix by the ectodermal factor. It has been shown by other investigators that fibroblast growth factor-2 is produced by limb ectoderm whereas transforming growth factor-2 is produced by limb ectoderm whereas transforming growth factor-beta is present in limb mesodermal tissues. Thus we conclude that the unique properties of mesodermally produced matrix underlying limb bud ectoderm are regulated, at least in part, by ectodermal fibroblast growth factor-2, probably in concert with mesodermal transforming growth factor-beta.