Derived from axial structures, Sonic Hedgehog (Shh) is secreted into the paraxial mesoderm, where it plays crucial roles in sclerotome induction and myotome differentiation. Through conditional loss-of-function in quail embryos, we investigate the timing and impact of Shh activity during early formation of sclerotome-derived vertebrae and ribs, and of lateral mesoderm-derived sternum. To this end, Hedgehog interacting protein (Hhip) was electroporated at various times between days 2 and 5. While the vertebral body and rib primordium showed consistent size reduction, rib expansion into the somatopleura remained unaffected, and the sternal bud developed normally. Additionally, we compared these effects with those of locally inhibiting BMP activity. Transfection of Noggin in the lateral mesoderm hindered sternal bud formation. Unlike Hhip, BMP inhibition via Noggin or Smad6 induced myogenic differentiation of the lateral dermomyotome lip, while impeding the growth of the myotome/rib complex into the somatic mesoderm, thus affirming the role of the lateral dermomyotome epithelium in rib guidance. Overall, these findings underscore the continuous requirement for opposing gradients of Shh and BMP activity in the morphogenesis of proximal and distal flank skeletal structures, respectively. Future research should address the implications of these early interactions to the later morphogenesis and function of the musculo-skeletal system and of possible associated malformations.