Fibroblast growth factors (Fgfs) have long been implicated in regulating vertebrate skeletal muscle differentiation, but their precise role(s) in vivo remain unclear. Here, we show that Fgf8 signalling in the somite is required for myod expression and terminal differentiation of a subset of fast muscle cells in the zebrafish lateral somite. In the absence of Fgf8, lateral somite cells transiently express myf5 but fail to make muscle and remain in a dermomyotome-like state characterised by pax3 and meox expression. Slow muscle fibres form and commence normal migration in the absence of Fgf8, but fail to traverse the expanded undifferentiated lateral somite. The Fgf8-independent residual population of medial fast muscle fibres is not Hedgehog dependent. However, Fgf8-independent medial fast muscle precursors are lacking in floatinghead mutants,suggesting that they require another ventral midline-derived signal. We conclude that Fgf8 drives terminal differentiation of a specific population of lateral muscle precursor cells within the early somite.