buttonhead (btd) encodes an SP1-like transcription factor required for the generation and specification of Drosophila head segments. We identified a murine btd homolog, termed mouse Btd (mBtd), which can support btd-dependent head development in transgenic fly embryos. Functional studies show that mBtd-deficient mice develop to term and die at birth. They exhibit brain malformations, posterior axial skeleton truncations, and shortened limbs. We present evidence that mBtd is required during early limb development to maintain, but not to initiate Wnt/beta-catenin-dependent FGF, Shh, and BMP-mediated signaling. The data indicate that mBtd represents a novel key player mediating proximodistal outgrowth of the limb.