FGF-2 is proposed to be an important ectodermal signal directing limb outgrowth and patterning. Consistent with this hypothesis we show that ectopic application of FGF-2 can maintain the apical ectodermal ridge (AER)-dependent expression of Sonic hedgehog (Shh), and AER-dependent zone of polarizing activity (ZPA) signaling. We also find that ectopic FGF-2 applied to the posterior wing bud caused a dramatic change in the morphology of the limb bud, and results in limbs that display a reduction in the length of individual skeletal elements and loss of digits. Associated with these morphological changes was an FGF-2-stimulated expansion and bifurcation of the expression domains of two posteriorly expressed genes, Shh and HoxD13. Applying FGF-2 at a central or anterior location in the limb bud did not alter the Shh expression domain or cause digit loss. To test whether ectopic application of FGF-2 into the posterior limb bud was influencing the movement of limb bud cells, we used the lipophilic dye DiI to map the behavior of posterior cells in response to FGF-2. In response to FGF-2 posterior limb bud cells move in both a proximal and a distal direction, causing the initially labeled cell population to bifurcate into two distinct domains. Our data suggest that FGF-2 is influencing limb outgrowth by modifying cell movements and subsequent position-specific cell-cell interactions that are important for limb morphogenesis.