Signals from the apical ectodermal ridge (AER) of the developing vertebrate limb, including fibroblast growth factor-8 (FGF-8), can maintain limb mesenchymal cells in a proliferative state. We report here that a specific CD44 splice variant is crucial for the proliferation of these mesenchymal cells. Epitopes carried by this variant colocalize temporally and spatially with FGF-8 in the AER throughout early limb development. A splice variant containing the same sequences expressed on model cells binds both FGF-4 and FGF-8 and stimulates mesenchymal cells in vitro. When applied to the AER, an antibody against a specific CD44 epitope blocks FGF presentation and inhibits limb outgrowth. Therefore, CD44 is necessary for limb development and functions in a novel growth factor presentation mechanism likely relevant in other physiological and pathological situations where a cell surface protein presents a signaling molecule to a neighboring cell.