The number of phalanges and joints are key features of digit 'identity' and are central to limb functionality and evolutionary adaptation. Prior chick work indicated that digit phalanges and their associated joints arise in a different manner than the more sparsely jointed long bones, and their identity is regulated by differential signalling from adjacent interdigits. Currently, there is no genetic evidence for this model, and the molecular mechanisms governing digit joint specification remain poorly understood. Using genetic approaches in mouse, here we show that functional 5'Hoxd-Gli3 antagonism acts indirectly, through Bmp signalling from the interdigital mesenchyme, to regulate specification of joint progenitors, which arise in conjunction with phalangeal precursors at the digit tip. Phalanx number, although co-regulated, can be uncoupled from joint specification. We propose that 5'Hoxd genes and Gli3 are part of an interdigital signalling centre that sets net Bmp signalling levels from different interdigits to coordinately regulate phalanx and joint formation.