Precise regulation of the morphogen sonic hedgehog (Shh) and modulation of the Shh signaling pathway is required for proper specification of cell fate within the developing limbs and neural tube, and resultant tissue morphogenesis. Tulp3 (tubby-like protein 3) is a protein of unknown function which has been implicated in nervous system development through gene knockout studies. We demonstrate here that mice lacking the Tulp3 gene develop abnormalities of both the neural tube and limbs consistent with improper regulation of Shh signaling. Tulp3−/− embryos show expansion of Shh target gene expression and display a ventralization of neural progenitor cells in the caudal neural tube. We further show that Tulp3−/−/Shh−/− compound mutant embryos resemble Tulp3 mutants, and express Shh target genes in the neural tube and limbs which are not expressed in Shh−/− embryos. This work uncovers a novel role for Tulp3 as a negative regulatory factor in the Hh pathway. Developmental Dynamics 238:1140–1149, 2009. © 2009 Wiley-Liss, Inc.