AbstractSonic hedgehog (Shh), produced in notochord and floor plate, is necessary both for neural and mesodermal development. To reach the myotome, Shh has to traverse the sclerotome. By loss and gain of Shh function, and floor plate deletions, we report that sclerotomal Shh is also necessary for neural tube development. Reducing the amount of Shh in sclerotome by membrane-tethered hedgehog-interacting protein or by Patched1, but not by dominant active Patched, decreased motoneuron numbers while also compromising myotome differentiation. These effects were a specific and direct consequence of reducing Shh. In addition, grafting notochords in a basal, but not apical location vis-a-vis the tube, profoundly affected motoneuron development, suggesting that initial ligand presentation occurs at the basal side of epithelia corresponding to the sclerotome-neural tube interface.Collectively, our results reveal that the sclerotome is a potential site of a Shh gradient that coordinates development of mesodermal and neural progenitors.Summary statementShh that transits through the sclerotome is presented to the neuroepithelium from its basal aspect to affect motoneuron development.