The temporomandibular joint (TMJ) is essential for jaw function, but the mechanisms regulating its development remain poorly understood. Because Indian hedgehog (Ihh) regulates trunk and limb skeletogenesis, we studied its possible roles in TMJ development. In wild-type mouse embryos, Ihh expression was already strong in condylar cartilage by embryonic day (E) 15.5, and expression of Ihh receptors and effector genes (Gli1, Gli2, Gli3, and PTHrP) indicated that Ihh range of action normally reached apical condylar tissue layers, including polymorphic chondroprogenitor layer and articular disc primordia. In Ihh(-/-) embryos, TMJ development was severely compromised. Condylar cartilage growth, polymorphic cell proliferation, and PTHrP expression were all inhibited, and growth plate organization and chondrocyte gene expression patterns were abnormal. These severe defects were partially corrected in double Ihh(-/-)/Gli3(-/-) mutants, signifying that Ihh action is normally modulated and delimited by Gli3 and Gli3(R) in particular. Both single and double mutants, however, failed to form an articular disc primordium, normally appreciable as an independent condensation between condylar apex and neighboring developing temporal bone in wild-type. This failure persisted at later stages, leading to complete absence of a normal functional disc and lubricin-expressing joint cavities. In summary, Ihh is very important for TMJ development, where it appears to regulate growth and elongation events, condylar cartilage phenotype, and chondroprogenitor cell function. Absence of articular disc and joint cavities in single and double mutants points to irreplaceable Ihh roles in formation of those critical TMJ components.