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Teleost fish fins, like all vertebrate limbs, comprise a series of bones laid out in characteristic pattern. Each fin's distal bony rays typically branch to elaborate skeletal networks providing form and function. Zebrafish caudal fin regeneration studies suggest basal epidermal-expressed Sonic hedgehog (Shh) promotes ray branching by partitioning pools of adjacent pre-osteoblasts. This Shh role is distinct from its well-studied Zone of Polarizing Activity role establishing paired limb positional information. Therefore, we investigated if and how Shh signaling similarly functions during developmental ray branching of both paired and unpaired fins while resolving cellular dynamics of branching by live imaging. We found shha is expressed uniquely by basal epidermal cells overlying pre-osteoblast pools at the distal aspect of outgrowing juvenile fins. Lateral splitting of each shha-expressing epidermal domain followed by the pre-osteoblast pools precedes overt ray branching. We use ptch2:Kaede fish and Kaede photoconversion to identify short stretches of shha+basal epidermis and juxtaposed pre-osteoblasts as the Shh/Smoothened (Smo) active zone. Basal epidermal distal collective movements continuously replenish each shha+domain with individual cells transiently expressing and responding to Shh. In contrast, pre-osteoblasts maintain Shh/Smo activity until differentiating. The Smo inhibitor BMS-833923 prevents branching in all fins, paired and unpaired, with surprisingly minimal effects on caudal fin initial skeletal patterning, ray outgrowth or bone differentiation. Staggered BMS-833923 addition indicates Shh/Smo signaling acts throughout the branching process. We use live cell tracking to find Shh/Smo restrains the distal movement of basal epidermal cells by apparent 'tethering' to pre-osteoblasts. We propose short-range Shh/Smo signaling promotes these heterotypic associations to couple instructive basal epidermal collective movements to pre-osteoblast repositioning as a unique mode of branching morphogenesis., Competing Interests: Declaration of competing interest None., (Copyright © 2021 Elsevier Inc. All rights reserved.)