Tendons connect muscle to skeletal elements. Although tendons have been shown to originate from the lateral plate mesoderm, very little is known at the molecular level about how they are formed. We have found that two genes, Follistatin and Eph-A4, are expressed in regions associated with tendon formation in developing chick limbs. Follistatin is expressed near the tip of the digits and subsequently around the tendon, whereas Eph A4 transcripts were localized in a slightly more proximal region and later in the body of the tendon. Previous work has demonstrated that application of TGFβ1 or TGFβ2 to inter-digital regions or the removal of ectoderm in the foot plate induces ectopic cartilage formation, while removal of ectoderm or application of FGF to tips of developing digits leads to truncation. Here we show that TGFβ1 or removal of ectoderm is also able to induce the expression of both Eph-A4 and Follistatin and that manipulations that cause truncations affect these genes. Thus cartilage and tendon development appear to be coordinated. Ectopic application of recombinant human Follistatin, an antgaonist of certain TGFβ super-family proteins including Activin and Bmp-4, results in the loss of tendon, implicating signalling by TGFβ super-family in the development of tendon during chick embryogenesis. Signalling by TGFβ family members, antagonised by Noggin is known to regulate skeletal development. Thus we suggest that parallel pathways govern both skeletal and tendon patterning.