The development of the eyelid requires coordinated cellular processes of proliferation, cell shape changes, migration and cell death. Mutant mice deficient in the fibroblast growth factor 10 (Fgf10) gene exhibit open-eyelids at birth. To elucidate the roles of FGF10 during eyelid formation, we examined the expression pattern of Fgf10 during eyelid formation and the phenotype of Fgf10-null eyelids in detail. Fgf10 is expressed by mesenchymal cells just beneath the protruding epidermal cells of the nascent eyelid. However, Fgf10-null epithelial cells running though the eyelid groove do not exhibit typical cuboid shape or sufficient proliferation. Furthermore, peridermal clumps are not maintained on the eyelid leading edge, and epithelial extension does not occur. At the cellular level, the accumulation of actin fibers is not observed in the mutant epithelial leading edge. The expression of activin/inhibin betaB (ActbetaB/Inhbb) and transforming growth factor alpha (Tgfa), previously reported to be crucial for eyelid development, is down-regulated in the mutant leading edge, while the onset of sonic hedgehog (Shh) expression is delayed on the mutant eyelid margin. Explant cultures of mouse eyelid primordia shows that the open-eyelid phenotype of the mutant is reduced by exogenous FGF10 protein, and that the expression of ActbetaB and Tgfa is ectopically induced in the thickened eyelid epithelium by the FGF10 protein. These results indicate a dual role of FGF10 in mouse eyelid development, for both proliferation and coordinated migration of eyelid epithelial cells by reorganization of the cytoskeleton, through the regulation of activin, TGFalpha and SHH signaling.