Vertebrate limbs develop in a temporal proximodistal sequence, with proximal regions specified and generated earlier than distal ones. Whereas considerable information is available on the mechanisms promoting limb growth, those involved in determining the proximodistal identity of limb parts remain largely unknown. We show here that retinoic acid (RA) is an upstream activator of the proximal determinant genes Meis1 and Meis2. RA promotes proximalization of limb cells and endogenous RA signaling is required to maintain the proximal Meis domain in the limb. RA synthesis and signaling range, which initially span the entire lateral plate mesoderm, become restricted to proximal limb domains by the apical ectodermal ridge (AER) activity following limb initiation. We identify fibroblast growth factor (FGF) as the main molecule responsible for this AER activity and propose a model integrating the role of FGF in limb cell proliferation, with a specific function in promoting distalization through inhibition of RA production and signaling.