Shh expression is highly restricted to the future sites of tooth development during the initiation of odontogenesis. This suggests a role for Shh as a proliferative factor, as localized epithelial thickenings invaginate to form a tooth bud. We have investigated this role by blocking Shh signaling between E10.5 and E12.5 in murine mandibular processes using a 5E1 blocking antibody and the PKA activator Forskolin. This results in down-regulation of Ptc, a principle target of Shh signaling. The effects of inhibition varied with developmental time. At E10.5, tooth development was arrested as epithelial thickenings and the numbers of teeth developing were considerably reduced. Inhibition at E12.5 produced localized apoptosis in the epithelium at the tip of the tooth buds, although some teeth were able to develop. Thus, Shh has dual roles in early odontogenesis, first in bud formation by stimulating epithelial proliferation, and second in the development of cap-stage tooth germs by increasing epithelial cell survival.