Mutations at the mouse short ear (se) locus alter the formation and repair of skeletal structures and the development of several soft tissues. Most of the developmental effects of the gene have been studied using a spontaneous mutation reported over 70 years ago. Here we show that this mutation consists of a nonsense mutation in a secreted signaling molecule called bone morphogenetic protein 5 (BMP5). This small sequence alteration, in combination with previously reported translocation and deletion mutations, provides strong genetic evidence that BMP5 is the normal product of the se locus. Transcripts from the Bmp5 gene are expressed at the earliest stages of normal skeletal development in patterns that closely resemble the shapes of forming skeletal elements. The gene is also expressed at several sites of soft tissue abnormalities previously reported in se animals, including lungs, liver, ureter, bladder, and intestines. The combined genetic, biochemical, and expression data suggest that BMP5 is a key signal used to initiate formation of particular skeletal elements and is required for normal development of several soft tissues as well.