The gremlin protein family contains antagonists of bone morphogenetic protein (BMP) signaling that are expressed in the neural crest. All family members are secreted proteins that act as BMP antagonists in embryonic explants and are expressed in the proximal airway epithelium of the lung during embryonic development. Gremlin-1 is required for early limb outgrowth and patterning in the FGF4-SHH feedback loop, while gremlin-2 binds and blocks the activity of BMP-2 and BMP-4. The dorsaling factor gremlin belongs to a novel gene family that includes the head-inducing factor Cerberus and the tumor suppressor DAN. Additionally, secreted gremlin relays the sonic hedgehog signal from the polarizing region to the apical ectodermal ridge.