The formation of the apical ectodermal ridge (AER) is critical for the distal outgrowth and patterning of the vertebrate limb. Recent work in the chick has demonstrated that interplay between the Wnt and Fgf signaling pathways is essential in the limb mesenchyme and ectoderm in the establishment and perhaps the maintenance of the AER. In the mouse, whereas a role for Fgfs for AER establishment and function has been clearly demonstrated, the role of Wnt/beta-catenin signaling, although known to be important, is obscure. In this study, we demonstrate that Wnt3, which is expressed ubiquitously throughout the limb ectoderm, is essential for normal limb development and plays a critical role in the establishment of the AER. We also show that the conditional removal of beta-catenin in the ventral ectodermal cells is sufficient to elicit the mutant limb phenotype. In addition, removing beta-catenin after the induction of the ridge results in the disappearance of the AER, demonstrating the requirement for continued beta-catenin signaling for the maintenance of this structure. Finally, we demonstrate that Wnt/beta-catenin signaling lies upstream of the Bmp signaling pathway in establishment of the AER and regulation of the dorsoventral polarity of the limb.