In order to understand how secreted signals regulate complex morphogenetic events, it is crucial to identify their cellular targets. By conditional inactivation of Fgfr1 and Fgfr2 and overexpression of the FGF antagonist sprouty 2 in different cell types, we have dissected the role of FGF signaling during heart outflow tract development in mouse. Contrary to expectation, cardiac neural crest and endothelial cells are not primary paracrine targets. FGF signaling within second heart field mesoderm is required for remodeling of the outflow tract: when disrupted, outflow myocardium fails to produce extracellular matrix and TGFβ and BMP signals essential for endothelial cell transformation and invasion of cardiac neural crest. We conclude that an autocrine regulatory loop, initiated by the reception of FGF signals by the mesoderm, regulates correct morphogenesis at the arterial pole of the heart. These findings provide new insight into how FGF signaling regulates context-dependent cellular responses during development.