Several 5' members of the Hoxd cluster are expressed in nested posterior-distal domains of the limb bud suggesting a role in regulating anteroposterior pattern of skeletal elements. While loss-of-function mutants have demonstrated a regulatory role for these genes in the developing limb, extensive functional overlaps between various different Hox genes has hampered elucidation of the roles played by individual members. In particular, the function of Hoxd-12 in the limb remains obscure. Using a gain-of-function approach, we find that Hoxd-12 misexpression in transgenic mice produces apparent transformations of anterior digits to posterior morphology and digit duplications, while associated tibial hemimelia and other changes indicate that formation/growth of certain skeletal elements is selectively inhibited. If the digital arch represents an anterior bending of the main limb axis, then the results are all reconcilable with a model in which Hoxd-12 promotes formation of postaxial chondrogenic condensations branching from this main axis (including the anteriormost digit) and selectively antagonizes formation of 'true' preaxial condensations that branch from this main axis (such as the tibia). Hoxd-12 misexpression can also induce ectopic Sonic hedgehog (Shh) expression, resulting in mirror-image polydactyly in the limb. Misexpression of Hoxd-12 in other lateral plate derivatives (sternum, pelvis) likewise phenocopies several luxoid/luxate class mouse mutants that all share ectopic Shh signalling. This suggests that feedback activation of Shh expression may be a major function of Hoxd-12. Hoxd-12 can bind to and transactivate the Shh promoter in vitro. Furthermore, expression of either exogenous Hoxd-11 or Hoxd-12 in cultured limb bud cells, together with FGF, induces expression of the endogenous Shh gene. Together these results suggest that certain 5' Hoxd genes directly amplify the posterior Shh polarizing signal in a reinforcing positive feedback loop during limb bud outgrowth.