During organ formation and regeneration a proper balance between promoting and restricting growth is critical to achieve stereotypical size. Limb bud outgrowth is driven by signals in a positive feedback loop involving fibroblast growth factor (Fgf) genes, sonic hedgehog (Shh) and Gremlin1 (Grem1). Precise termination of these signals is essential to restrict limb bud size. The current model predicts a sequence of signal termination consistent with that in chick limb buds. Our finding that the sequence in mouse limb buds is different led us to explore alternative mechanisms. Here we show, by analysing compound mouse mutants defective in genes comprising the positive loop, genetic evidence that FGF signalling can repress Grem1 expression, revealing a novel Fgf/Grem1 inhibitory loop. This repression occurs both in mouse and chick limb buds, and is dependent on high FGF activity. These data support a mechanism where the positive Fgf/Shh loop drives outgrowth and an increase in FGF signalling, which triggers the Fgf/Grem1 inhibitory loop. The inhibitory loop then operates to terminate outgrowth signals in the order observed in either mouse or chick limb buds. Our study unveils the concept of a self-promoting and self-terminating circuit that may be used to attain proper tissue size in a broad spectrum of developmental and regenerative settings.