The regulation of the Gli genes during somite formation has been investigated in quail embryos. The Gli genes are a family encoding three related zinc finger transcription factors, Gli1, Gli2 and Gli3, which are effectors of Shh signaling in responding cells. A quail Gli3 cDNA has been cloned and its expression compared with Gli1 and Gli2. These studies show that Gli1, Gli2 and Gli3 are co-activated at the time of somite formation, thus providing a mechanism for regulating the initiation of Shh signaling in somites. Embryo surgery and paraxial mesoderm explant experiments show that each of the Gli genes is regulated by distinct signaling mechanisms. Gli1 is activated in response to Shh produced by the notochord, which also controls the dorsalization of Gli2 and Gli3 following their activation by Wnt signaling from the surface ectoderm and neural tube. This surface ectoderm/neural tube Wnt signaling has both negative and positive functions in Gli2 and Gli3 regulation: these signals repress Gli3 in segmental plate mesoderm prior to somite formation and then promote somite formation and the somite-specific activation of Gli2 and Gli3. These studies, therefore, establish a role for Wnt signaling in the control of Shh signal transduction through the regulation of Gli2 and Gli3, and provide a mechanistic basis for the known synergistic actions of surface ectoderm/neural tube and notochord signaling in somite cell specification.