During somite maturation, the ventral half of the epithelial somite disintegrates into the mesenchymal sclerotome, whereas the dorsal half forms a transitory epithelial sheet, the dermomyotome, lying in between the sclerotome and the surface ectoderm. The dermomyotome is the source of the majority of the mesodermal tissues in the body, giving rise to cell types as different as muscle, connective tissue, endothelium and cartilage. Thus, the dermomyotome is the most important turntable of mesodermal cell fate choice in the vertebrate embryo. Sclerotome development is characterized by a cranio-caudal polarization, resegmentation and axial identity. Its formation is controlled by signals from the notochord, the neural tube, the lateral plate mesoderm and the myotome. These signals and cross-talk between somite cells lead to the separation of various subdomains, like the central, ventral, dorsal and lateral sclerotome. Here, we discuss the current knowledge on the formation of the dermomyotome and the mechanisms leading to the development of the various dermomyotomal derivatives, with special emphasis on the development of musculature and dermis. We further discuss the molecular control of sclerotomal subdomain formation and cell type specification.