Hedgehog (Hh) signaling is required for the differentiation of mesenchymal progenitors into osteoblasts during endochondral bone formation. However, the role of Hh signaling in differentiated osteoblasts during adult bone homeostasis remains to be elucidated. In addition, Hh signaling is also required to control chondrocyte proliferation and hypertrophy. In the past year we found that in the postnatal bone, Hh signaling activity has to be tightly regulated. Abnormal activation of Hh signaling in the bone leads to tumor-like lesions. In addition, we found that in the developing limb bud, Hh signaling is integrated with other signaling events by the LIM homeobox transcription factors that coordinate three-dimensional limb patterning and growth.