In vertebrates, somite differentiation is mediated in part by Sonic Hedgehog (Shh), secreted by the notochord and the floor plate. However, Shh- null mice display close to normal expression of molecular markers for dermomytome, myotome, and sclerotome, indicating that Shh might not be required for their initial induction. In this paper, we have addressed the capacity of Shh to regulate in vivo the expression of the somite differentiation markers Pax-1, MyoD, and Pax-3 after separation of paraxial mesoderm from axial structures. We show that Pax-1, which is lost under these experimental conditions, is rescued by Shh. In contrast, Shh maintains, but cannot induce MyoD expression, while Pax-3 expression is independent of the presence of axial structures or Shh. Finally, we demonstrate that Shh is a potent mitogen for somitic cells, supporting the idea that it may serve to expand subpopulations of cells within the somite.