During embryonic development, cells are instructed which position to occupy, they interpret these cues as differentiation programmes, and expand these patterns by growth. Sonic hedgehog (Shh) specifies positional identity in many organs; however, its role in growth is not well understood. In this study, we show that inactivation of Shh in external genitalia extends the cell cycle from 8.5 to 14.4 h, and genital growth is reduced by ∼75%. Transient Shh signalling establishes pattern in the genital tubercle; however, transcriptional levels of G1 cell cycle regulators are reduced. Consequently, G1 length is extended, leading to fewer progenitor cells entering S-phase. Cell cycle genes responded similarly to Shh inactivation in genitalia and limbs, suggesting that Shh may regulate growth by similar mechanisms in different organ systems. The finding that Shh regulates cell number by controlling the length of specific cell cycle phases identifies a novel mechanism by which Shh elaborates pattern during appendage development.