Wnt signaling pathways are regulated both at the intracellular and extracellular levels. During embryogenesis, the in vivo effects of the secreted frizzled-related protein (Sfrp) family of Wnt inhibitors are poorly understood. Here, we show that inactivation of Sfrp2 results in subtle limb defects in mice with mesomelic shortening and consistent shortening of all autopodal elements that is clinically manifested as brachydactyly. In addition, there is soft-tissue syndactyly of the hindlimb. The brachydactyly is caused by decreased chondrocyte proliferation and delayed differentiation in distal limb chondrogenic elements. These data suggest that Sfrp2 can regulate both chondrogenesis and regression of interdigital mesenchyme in distal limb. Sfrp2 can also repress canonical Wnt signaling by Wnt1, Wnt9a, and Wnt4 in vitro. Sfrp2−/− and TOPGAL/Sfrp2−/− mice have a mild increase in beta-catenin and beta-galactosidase staining, respectively, in some phalangeal elements. This however does not exclude a potential concurrent effect on non-canonical Wnt signaling in the growth plate. In combination with what is known about BMP and Wnt signaling in human brachydactylies, our data establish a critical role for Sfrp2 in proper distal limb formation and suggest SFPR2 could be a novel candidate gene for human brachy–syndactyly defects. J. Cell. Physiol. 217: 127–137, 2008. © 2008 Wiley-Liss, Inc.