We demonstrate that signaling via the bone morphogenetic protein receptor IA (BMPR-IA) is required to establish two of the three cardinal axes of the limb: the proximal-distal axis and the dorsal-ventral axis. We generated a conditional knockout of the gene encoding BMPR-IA (Bmpr) that disrupted BMP signaling in the limb ectoderm. In the most severely affected embryos, this conditional mutation resulted in gross malformations of the limbs with complete agenesis of the hindlimbs. The proximal-distal axis is specified by the apical ectodermal ridge (AER), which forms from limb ectoderm at the distal tip of the embryonic limb bud. Analyses of the expression of molecular markers, such as Fgf8, demonstrate that formation of the AER was disrupted in the Bmpr mutants. Along the dorsal/ventral axis, loss of engrailed 1 (En1) expression in the non-ridge ectoderm of the mutants resulted in a dorsal transformation of the ventral limb structures. The expression pattern of Bmp4 and Bmp7 suggest that these growth factors play an instructive role in specifying dorsoventral pattern in the limb. This study demonstrates that BMPR-IA signaling plays a crucial role in AER formation and in the establishment of the dorsal/ventral patterning during limb development.