During somite development, a fibroblast growth factor (FGF) signal secreted from the myotome induces formation of a scleraxis (Scx)-expressing tendon progenitor population in the sclerotome, at the juncture between the future lineages of muscle and cartilage. While overexpression studies show that the entire sclerotome is competent to express Scx in response to FGF signaling, the normal Scx expression domain includes only the anterior and posterior dorsal sclerotome. To understand the molecular basis for this restriction, we examined the expression of a set of genes involved in FGF signaling and found that several members of the Fgf8synexpression group are co-expressed with Scx in the dorsal sclerotome. Of particular interest were the Ets transcription factors Pea3 and Erm, which function as transcriptional effectors of FGF signaling. We show here that transcriptional activation by Pea3and Erm in response to FGF signaling is both necessary and sufficient for Scx expression in the somite, and propose that the domain of the somitic tendon progenitors is regulated both by the restricted expression of Pea3 and Erm, and by the precise spatial relationship between these Ets transcription factors and the FGF signal originating in the myotome.