Organogenesis begins with specification of a progenitor cell population, the size of which provides a foundation for the organ's final dimensions. Here, we present a new mechanism for regulating the number of progenitor cells by limiting their density within a competent region. We demonstrate that retinoic acid signaling restricts cardiac specification in the zebrafish embryo. Reduction of retinoic acid signaling causes formation of an excess of cardiomyocytes, via fate transformations that increase cardiac progenitor density within a multipotential zone. Thus, retinoic acid signaling creates a balance between cardiac and noncardiac identities, thereby refining the dimensions of the cardiac progenitor pool.