During limb outgrowth, signaling by bone morphogenetic proteins (BMPs) must be moderated to maintain the signaling loop between the zone of polarizing activity (ZPA) and the apical ectodermal ridge (AER). Gremlin, an extracellular Bmp antagonist, has been proposed to fulfill this function and therefore be important in limb patterning. We tested this model directly by mutating the mouse gene encoding gremlin (Cktsf1b1, herein called gremlin). In the mutant limb, the feedback loop between the ZPA and the AER is interrupted, resulting in abnormal skeletal pattern. We also show that the gremlin mutation is allelic to the limb deformity mutation (ld). Although Bmps and their antagonists have multiple roles in limb development, these experiments show that gremlin is the principal BMP antagonist required for early limb outgrowth and patterning.