In most tetrapod vertebrates, limb skeletal progenitors condense with postaxial dominance. Posterior elements (such as ulna and fibula) appear prior to their anterior counterparts (radius and tibia), followed by digit-appearance order with continuing postaxial polarity. The only exceptions are urodele amphibians (salamanders), whose limb elements develop with preaxial polarity and who are also notable for their unique ability to regenerate complete limbs as adults. The mechanistic basis for this preaxial dominance has remained an enigma and has even been proposed to relate to the acquisition of novel genes involved in regeneration. However, recent fossil evidence suggests that preaxial polarity represents an ancestral rather than derived state. Here, we report that 5'Hoxd (Hoxd11-d13) gene deletion in mouse is atavistic and uncovers an underlying preaxial polarity in mammalian limb formation. We demonstrate this shift from postaxial to preaxial dominance in mouse results from excess Gli3 repressor (Gli3R) activity due to the loss of 5'Hoxd-Gli3 antagonism and is associated with cell-cycle changes promoting precocious cell-cycle exit in the anterior limb bud. We further show that Gli3 knockdown in axolotl results in a shift to postaxial dominant limb skeleton formation, as well as expanded paddle-shaped limb-bud morphology and ensuing polydactyly. Evolutionary changes in Gli3R activity level, which also played a key role in the fin-to-limb transition, appear to be fundamental to the shift from preaxial to postaxial polarity in formation of the tetrapod limb skeleton.