The positional cues that govern the fate of cells along the dorsoventral axis of the developing vertebrate limb are established in the mesoderm before outgrowth of limb buds. In Drosophila, a LIM/-homeodomain gene, apterous, expressed in the dorsal compartment of the wing disc, specifies dorsal cell fate. Here we report the isolation of a vertebrate LIM-homeodomain containing gene, Chick Lmx1 (C-Lmx1). Transcripts for C-Lmx1 are detected in the presumptive dorsal limb mesoderm and are restricted thereafter to the dorsal mesoderm of the developing chick bud. C-Lmx1 expression is regulated by the overlying ectoderm where Wnt7a messenger RNA is localized. Wnt7a, required for normal development of the dorsoventral axis in mouse limbs, can induce ectopic expression of C-Lmx1 in ventral mesoderm. Misexpression of C-Lmx1 during limb outgrowth causes ventral to dorsal transformations of limb mesoderm. We propose that C-Lmx1 specifies dorsal cell fate during chick limb development.