Sonic hedgehog (Shh) has been proposed to function as an inductive and trophic signal that controls development of epaxial musculature in vertebrate embryos. In contrast, development of hypaxial muscles was assumed to occur independently of Shh. We here show that formation of limb muscles was severely affected in two different mouse strains with inactivating mutations of the Shh gene. The limb muscle defect became apparent relatively late and initial stages of hypaxial muscle development were unaffected or only slightly delayed. Micromass cultures and cultures of tissue fragments derived from limbs under different conditions with or without the overlaying ectoderm indicated that Shh is required for the maintenance of the expression of myogenic regulatory factors (MRFs) and, consecutively, for the formation of differentiated limb muscle myotubes. We propose that Shh acts as a survival and proliferation factor for myogenic precursor cells during hypaxial muscle development. Detection of a reduced but significant level of Myf5 expression in the epaxial compartment of somites of Shh homozygous mutant embryos at E9.5 indicated that Shh might be dispensable for the initiation of myogenesis both in hypaxial and epaxial muscles. Our data suggest that Shh acts similarly in both somitic compartments as a survival and proliferation factor and not as a primary inducer of myogenesis.