The elaborate anatomy of hands and feet is shaped by coordinated formation of digits and regression of the interdigital mesenchyme (IM). A failure of this process causes persistence of interdigital webbing and consequently cutaneous syndactyly. Bone morphogenetic proteins (BMPs) are key inductive factors for interdigital cell death (ICD) in vivo. NOGGIN (NOG) is a major BMP antagonist that can interfere with BMP-induced ICD when applied exogenously, but its in vivo role in this process is unknown. We investigated the physiological role of NOG in ICD and found that Noggin null mice display cutaneous syndactyly and impaired interdigital mesenchyme specification. Failure of webbing regression was caused by lack of cell cycle exit and interdigital apoptosis. Unexpectedly, Noggin null mutants also exhibit increased Indian hedgehog (Ihh) expression within cartilage condensations that leads to aberrant extension of IHH downstream signaling into the interdigital mesenchyme. A converse phenotype with increased apoptosis and reduced cell proliferation was found in the interdigital mesenchyme of Ihh mutant embryos. Our data point towards a novel role for NOG in balancing Ihh expression in the digits impinging on digit-interdigit cross talk. This suggests a so far unrecognized physiological role for IHH in interdigital webbing biology.