Vertebrate Hox clusters contain protein-coding genes that regulate body axis development and microRNA (miRNA) genes whose functions are not yet well understood. We overexpressed the Hox cluster microRNA miR-196 in zebrafish embryos and found four specific, viable phenotypes: failure of pectoral fin bud initiation, deletion of the 6th pharyngeal arch, homeotic aberration and loss of rostral vertebrae, and reduced number of ribs and somites. Reciprocally, miR-196 knockdown evoked an extra pharyngeal arch, extra ribs, and extra somites, confirming endogenous roles of miR-196. miR-196 injection altered expression of hox genes and the signaling of retinoic acid through the retinoic acid receptor gene rarab. Knocking down rarab mimicked the pectoral fin phenotype of miR-196 overexpression, and reporter constructs tested in tissue culture and in embryos showed that the rarab 32UTR is a miR-196 target for pectoral fin bud initiation. These results show that a Hox cluster microRNA modulates development of axial patterning similar to nearby protein-coding Hox genes, and acts on appendicular patterning at least in part by modulating retinoic acid signaling.