Vertebrate limbs develop three main proximodistal (PD) segments (upper arm, forearm, and hand) in a proximal-to-distal sequence. Despite extensive research into limb development, whether PD specification occurs through nonautonomous or autonomous mechanisms is not resolved. Heterotopic transplantation of intact and recombinant chicken limb buds identifies signals in the embryo trunk that proximalize distal limb cells to generate a complete PD axis. In these transplants, retinoic acid induces proximalization, which is counteracted by fibroblast growth factors from the distal limb bud; these related actions suggest that the first limb-bud PD regionalization results from the balance between proximal and distal signals. The plasticity of limb progenitor cell identity in response to diffusible signals provides a unifying view of PD patterning during vertebrate limb development and regeneration.