Loss- and gain-of function approaches modulating canonical Wnt/β-catenin activity have established a role for the Wnt/β-catenin pathway during tooth development. Here we show that Wnt/β-catenin signaling is required in the dental mesenchyme for normal incisor development, as locally restricted genetic inactivation of β-catenin results in a splitting of the incisor placode, giving rise to two incisors. Molecularly this is first associated with down-regulation of Bmp4 and subsequent splitting of the Shh domain at a subsequent stage. The latter phenotype can be mimicked by ectopic application of the BMP antagonist Noggin. Conditional genetic inactivation of Bmp4 in the mesenchyme reveals that mesenchymal BMP4 activity is required for maintenance of Shh expression in the dental ectoderm. Taken together our results indicate that β-catenin together with Lef1 and Tcf1 are required to activate Bmp4 expression in order to maintain Shh expression in the dental ectoderm. This provides a mechanism whereby the number of incisors arising from one placode can be varied through local alterations of a mesenchymal signaling circuit involving β-catenin, Lef1, Tcf1 and Bmp4.