In vertebrates, the apical ectodermal ridge (AER) is a specialized epithelium localized at the dorsoventral boundary of the limb bud that regulates limb outgrowth. In Drosophila, the wing margin is also a specialized region located at the dorsoventral frontier of the wing imaginal disc. The wingless and Notch pathways have been implicated in positioning both the wing margin and the AER. One of the nuclear effectors of the Notch signal in the wing margin is the transcription factor cut. Here we report the identification of two chick homologues of the Cut/Cux/CDP family that are expressed in the developing limb bud. Chick cux1 is expressed in the ectoderm outside the AER, as well as around ridge-like structures induced by (&bgr;)-catenin, a downstream target of the Wnt pathway. cux1 overexpression in the chick limb results in scalloping of the AER and limb truncations, suggesting that Cux1 may have a role in limiting the position of the AER by preventing the ectodermal cells around it from differentiating into AER cells. The second molecule of the Cut family identified in this study, cux2, is expressed in the pre-limb lateral plate mesoderm, posterior limb bud and flank mesenchyme, a pattern reminiscent of the distribution of polarizing activity. The polarizing activity is determined by the ability of a certain region to induce digit duplications when grafted into the anterior margin of a host limb bud. Several manipulations of the chick limb bud show that cux2 expression is regulated by retinoic acid, Sonic hedgehog and the posterior AER. These results suggest that Cux2 may have a role in generating or mediating polarizing activity. Taking into account the probable involvement of Cut/Cux/CDP molecules in cell cycle regulation and differentiation, our results raise the hypothesis that chick Cux1 and Cux2 may act by modulating proliferation versus differentiation in the limb ectoderm and polarizing activity regions, respectively.