Background: Secreted Hedgehog (Hh) signalling molecules have profound influences on many developing and regenerating tissues. Yet in most vertebrate tissues it is unclear which Hh-responses are the direct result of Hh action on a particular cell type because Hhs frequently elicit secondary signals. In developing skeletal muscle, Hhs promote slow myogenesis in zebrafish and are involved in specification of medial muscle cells in amniote somites. However, the extent to which non-myogenic cells, myoblasts or differentiating myocytes are direct or indirect targets of Hh signalling is not known. Results: We show that Sonic hedgehog (Shh) can act directly on cultured C2 myoblasts, driving Gli1 expression, myogenin up-regulation and terminal differentiation, even in the presence of growth factors that normally prevent differentiation. Distinct myoblasts respond differently to Shh: in some slow myosin expression is increased, whereas in others Shh simply enhances terminal differentiation. Exposure of chick wing bud cells to Shh in culture increases numbers of both muscle and non-muscle cells, yet simultaneously enhances differentiation of myoblasts. The small proportion of differentiated muscle cells expressing definitive slow myosin can be doubled by Shh. Shh over-expression in chick limb bud reduces muscle mass at early developmental stages while inducing ectopic slow muscle fibre formation. Abundant later-differentiating fibres, however, do not express extra slow myosin. Conversely, Hh loss of function in the limb bud, caused by implanting hybridoma cells expressing a functionally blocking anti-Hh antibody, reduces early slow muscle formation and differentiation, but does not prevent later slow myogenesis. Analysis of Hh knockout mice indicates that Shh promotes early somitic slow myogenesis. Conclusions: Taken together, the data show that Hh can have direct pro-differentiative effects on myoblasts and that early-developing muscle requires Hh for normal differentiation and slow myosin expression. We propose a simple model of how direct and indirect effects of Hh regulate early limb myogenesis.