The mechanism of pattern formation during limb muscle development remains poorly understood. The canonical view holds that naïve limb muscle progenitor cells (MPCs) invade a pre-established pattern of muscle connective tissue, thereby forming individual muscles. Here, we show that early murine embryonic limb MPCs highly accumulate pSMAD1/5/9, demonstrating active signaling of bone morphogenetic proteins (BMP) in these cells. Overexpression of inhibitory human SMAD6 (huSMAD6) in limb MPCs abrogated BMP signaling, impaired their migration and proliferation, and accelerated myogenic lineage progression. Fewer primary myofibers developed, causing an aberrant proximodistal muscle pattern. Patterning was not disturbed when huSMAD6 was overexpressed in differentiated muscle, implying that the proximodistal muscle pattern depends on BMP-mediated expansion of MPCs before their differentiation. We show that limb MPCs differentially express Hox genes, and Hox-expressing MPCs displayed active BMP signaling. huSMAD6 overexpression caused loss of HOXA11 in early limb MPCs. In conclusion, our data show that BMP signaling controls expansion of embryonic limb MPCs as a prerequisite for establishing the proximodistal muscle pattern, a process that involves expression of Hox genes.