Reciprocal inductive signals between the endoderm and mesoderm are critical to vertebrate gut development. Sonic hedgehog encodes a secreted protein known to act as an inductive signal in several regions of the developing embryo. In this report, we provide evidence to support the role of Sonic hedgehog and its target genes Bmp-4 and the Abd-B-related Hox genes in the induction and patterning the chick hindgut. Sonic is expressed in the definitive endoderm at the earliest stage of chick gut formation. Immediately subjacent to Sonic expression in the caudal endoderm is undifferentiated mesoderm, later to become the visceral mesoderm of the hindgut. Genes expressed within this tissue include Bmp-4 (a TGF-beta relative implicated in proper growth of visceral mesoderm) and members of the Abd-B class of Hox genes (known regulators of pattern in many aspects of development). Using virally mediated misexpression, we show that Sonic hedgehog is sufficient to induce ectopic expression of Bmp-4 and specific Hoxd genes within the mesoderm. Sonic therefore appears to act as a signal in an epithelial-mesenchymal interaction in the earliest stages of chick hindgut formation. Gut pattern is evidenced later in gut morphogenesis with the presence of anatomic boundaries reflecting phenotypically and physiologically distinct regions. The expression pattern of the Abd-b-like Hox genes remains restricted in the hindgut and these Hox expression domains reflect gut morphologic boundaries. This finding strongly supports a role for these genes in determining the adult gut phenotype. Our results provide the basis for a model to describe molecular controls of early vertebrate hindgut development and patterning. Expression of homologous genes in Drosophila suggest that aspects of gut morphogenesis may be regulated by similar inductive networks in the two organisms.