Organs developing as appendages of the ectoderm are initiated from epithelial thickenings called placodes. Their formation is regulated by interactions between the ectoderm and underlying mesenchyme, and several signalling molecules have been implicated as activators or inhibitors of placode formation. Ectodysplasin (Eda) is a unique signalling molecule in the tumour necrosis factor family that, together with its receptor Edar, is necessary for normal development of ectodermal organs both in humans and mice. We have shown previously that overexpression of the Eda-A1 isoform in transgenic mice stimulates the formation of several ectodermal organs. In the present study, we have analysed the formation and morphology of placodes using in vivo and in vitro models in which both the timing and amount of Eda-A1 applied could be varied. The hair and tooth placodes of K14-Eda-A1 transgenic embryos were enlarged, and extra placodes developed from the dental lamina and mammary line. Exposure of embryonic skin to Eda-A1 recombinant protein in vitro stimulated the growth and fusion of placodes. However, it did not accelerate the initiation of the first wave of hair follicles giving rise to the guard hairs. Hence, the function of Eda-A1 appears to be downstream of the primary inductive signal required for placode initiation during skin patterning. Analysis of BrdU incorporation indicated that the formation of the epithelial thickening in early placodes does not involve increased cell proliferation and also that the positive effect of Eda-A1 on placode expansion is not a result of increased cell proliferation. Taken together, our results suggest that Eda-A1 signalling promotes placodal cell fate during early development of ectodermal organs.