The interaction between signaling pathways is a central question in the study of organogenesis. Using the developing murine tongue as a model, we uncovered unknown relationships between Sonic hedgehog (SHH) and retinoic acid (RA) signaling. Genetic loss of SHH signaling leads to enhanced RA activity subsequent to loss of SHH-dependent expression of Cyp26a1 and Cyp26c1. This causes a cell identity switch, prompting the epithelium of the tongue to form heterotopic minor salivary glands and to overproduce oversized taste buds. At developmental stages during which Wnt10b expression normally ceases and Shh becomes confined to taste bud cells, loss of SHH inputs causes the lingual epithelium to undergo an ectopic and anachronic expression of Shh and Wnt10b in the basal layer, specifying de novo taste placode induction. Surprisingly, in the absence of SHH signaling, lingual epithelial cells adopted a Merkel cell fate, but this was not caused by enhanced RA signaling. We show that RA promotes, whereas SHH, acting strictly within the lingual epithelium, inhibits taste placode and lingual gland formation by thwarting RA activity. These findings reveal key functions for SHH and RA in cell fate specification in the lingual epithelium and aid in deciphering the molecular mechanisms that assign cell identity.