The development of the vertebrate gut requires signaling between the endoderm and mesoderm for establishing its normal anteroposterior (AP) axis and for tissue-specific differentiation. Factors implicated in positional specification of the AP regions of the gut include endodermally expressed Sonic hedgehog (Shh), mesodermally expressed Bmp4 and members of the Hox gene family. We have investigated the roles of these factors during AP regional specification of the chick embryonic gut. Early in gut development, the endoderm sends inductive signals to the mesoderm. Shh has been implicated as one of these signals. We find a differential response to exposure of the inductive influence of Shh along the AP axis of the gut. Virally mediated misexpression of Shh results in ectopic upregulation of its receptor Ptc and a cellular proliferation throughout the gut mesoderm. Although ectopic Shh can induce Bmp4 in the mesoderm of the midgut and hindgut, Bmp4 is not induced in the stomach region of the foregut. The stomach region has a thicker layer of mesoderm than the rest of the gut suggesting that the normal function of Bmp4 could be to limit mesodermal growth in the non-stomach regions of the gut. Ectopic Bmp4 expression in the stomach results in a reduction of the mesodermal component consistent with this hypothesis. In addition to the regional restriction on Bmp4 induction, Shh can only induce Hoxd-13 in the mesoderm of the hindgut. These findings suggest that a prepattern exists in the primitive gut mesoderm prior to expression of Shh in the endoderm. The gut mesoderm is subsequently responsible for inducing region-specific differentiation of its overlying endoderm. We tested the role of Hoxd-13, normally restricted in its mesodermal expression to the most posterior region of the hindgut (cloaca), in controlling adjacent endodermal differentiation. When virally mediated Hoxd-13 is misexpressed in the primitive midgut mesoderm, there is a transformation of the endoderm to the morphology and mucin content of the hindgut. Thus, the positionally restricted expression of a Hox gene in the gut mesoderm influences the inductive signaling that leads to regionally specific differentiation of gut endoderm.