Dorsoventral (DV) patterning of the vertebrate limb requires the function of the transcription factor Engrailed 1 (EN1) in the ventral ectoderm. EN1 restricts, to the dorsal half of the limb, the expression of the two genes known to specify dorsal pattern. Limb growth along the proximodistal (PD) axis is controlled by the apical ectodermal ridge (AER), a specialized epithelium that forms at the distal junction between dorsal and ventral ectoderm. Using retroviral-mediated misexpression of the bone morphogenetic protein (BMP) antagonist Noggin or an activated form of the BMP receptor in the chick limb, we demonstrate that BMP plays a key role in both DV patterning and AER induction. Thus, the DV and PD axes are linked by a common signal. Loss and gain of BMP function experiments show that BMP signaling is both necessary and sufficient to regulate EN1 expression, and consequently DV patterning. Our results also indicate that BMPs are required during induction of the AER. Manipulation of BMP signaling results in either disruptions in the endogenous AER, leading to absent or severely truncated limbs or the formation of ectopic AERs that can direct outgrowth. Moreover, BMP controls the expression of the MSX transcription factors, and our results suggest that MSX acts downstream of BMP in AER induction. We propose that the BMP signal bifurcates at the level of EN1 and MSX to mediate differentially DV patterning and AER induction, respectively.