The signaling molecule Sonic hedgehog (Shh) is required for differentiation of the vertebrate retina. In the developing zebrafish retina, shh expression is initiated at the ventronasal region, from where it spreads as a wave through the retina. To investigate the molecular mechanism underlying this coordinated expression of shh, we mapped the cis-regulatory region and identified a novel regulatory sequence in the first intron of the shh locus. This sequence contains binding sites for the transcription factors Erm and Pea3 that are known transducers of Fgf signaling. Mutation of the binding sites or knockdown of Pea3 and Erm abolishes transgene expression, indicating that Fgf signaling regulates shh expression in the retina. We provide evidence that Fgf3 and -8 control initiation of expression, while Fgf19 is crucial for the propagation of transgene expression through the retina. Inhibitor experiments indicate a continued requirement of FGF and Hedgehog (Hh) signaling for transgene expression after initiation at the ventronasal aspect of the retina. We propose a model, in which Fgf3 and -8 initiate expression and Fgf19 and Shh signals cooperate subsequently to promote establishment of expression throughout the retina.