The pattern of feather buds in a tract is thought to result from the relative ratios between activator and inhibitor signals through a lateral inhibition process. We analyse the role of Drm/Gremlin, a BMPs antagonist expressed during feather pattern formation, in the dermal precursor, the dense dermis, the interbud dermis and in the posterior dermal condensation. We have altered the activity of Drm in embryonic chick skin using retroviral vectors expressing drm/ gremlin and bmps. We show that expression of endogenous drm is under the control of a feedback loop induced by the BMP pathway, and that overexpression of drm results in fusion between adjacent feather buds. We propose that endogenous BMP proteins induce drm expression in the interbud dermis. In turn, the Drm/Gremlin protein limits the inhibitory effect of BMPs, allowing the adjacent row of feathers to form. Thus, the balance between BMPs and its antagonist Drm would regulate the size and spacing of the buds.