How signals coordinate cellular proliferation with differentiation to regulate cell fate transitions is poorly understood. Hair follicle dermal condensates (DCs) emerge in developing skin from an acute cell fate transition in which cell cycle exit and molecular differentiation occur simultaneously. Here, we show that the coincident levels of Wnt and Hedgehog signals synchronize these two processes and when uncoupled, trigger them discordantly, resulting in asynchronous arrest and fuzzy cell fate borders. We use an innovative computational approach to dissect out independent processes from scRNA-sequencing data to show that high Wnt activity alone elicits cell cycle exit through a Hedgehog mediator, Gli3. Furthermore, Hedgehog induces DC genes in a Wnt-dependent manner while cell-autonomously accelerating Wnt activity, effectively synchronizing cell cycle exit with DC gene expression. These results show that the interaction of signal gradients can balance proliferation with differentiation to regulate cell fate transitions, revealing a tunable logic to tissue patterning.