BMP signaling is pivotal for normal limb bud development in vertebrate embryos and genetic analysis of receptors and ligands in the mouse revealed their requirement in both mesenchymal and ectodermal limb bud compartments. In this study, we genetically assessed the potential essential functions of SMAD4, a mediator of canonical BMP/TGFß signal transduction, in the mouse limb bud ectoderm. Msx2‐Cre was used to conditionally inactivate Smad4 in the ectoderm of fore‐ and hindlimb buds. In hindlimb buds, the Smad4 inactivation disrupts the establishment and signaling by the apical ectodermal ridge (AER) from early limb bud stages onwards, which results in severe hypoplasia and/or aplasia of zeugo‐ and autopodal skeletal elements. In contrast, the developmentally later inactivation of Smad4 in forelimb buds does not alter AER formation and signaling, but prolongs epithelial‐mesenchymal feedback signaling in advanced limb buds. The late termination of SHH and AER‐FGF signaling delays distal progression of digit ray formation and inhibits interdigit apoptosis. In summary, our genetic analysis reveals the temporally and functionally distinct dual requirement of ectodermal Smad4 during initiation and termination of AER signaling. genesis 51:660–666. © 2013 Wiley Periodicals, Inc.