Hedgehog (Hh) proteins control many developmental events by inducing specific cell fates or regulating cell proliferation. The Patched1 (Ptc1) protein, a binding protein for Hh molecules, appears to oppose Hh signals by repressing transcription of genes that can be activated by Hh. Sonic hedgehog (Shh), one of the vertebrate homologs of Hh, controls patterning and growth of the limb but the early embryonic lethality of ptc1(−)(/)(−) mice obscures the roles of ptc1 in later stages of development. We partially rescued ptc1 homozygous mutant embryos using a metallothionein promoter driving ptc1. In a wild-type background, the transgene causes a marked decrease in animal size starting during embryogenesis, and loss of anterior digits. In ptc1 homozygotes, a potent transgenic insert allowed survival to E14 and largely normal morphology except for midbrain overgrowth. A less potent transgene gave rise to partially rescued embryos with massive exencephaly, and polydactyly and branched digits in the limbs. The polydactyly was preceded by unexpected anterior limb bud transcription of Shh, so one function of ptc1 is to repress Shh expression in the anterior limb bud.