Molecular events that underlie emergence and patterning of intestinal villi are unknown. In Gli1LacZ/+ mice, clusters of LacZ positive Hedgehog (Hh) transducing cells form beneath the epithelium prior to villus emergence and remain associated with emerging villi. Clusters initiate anteriorly and dorsally and spread posteriorly and ventrally. These clusters also express Pdgfrα; deletion of Pdgfrα reduces the number of villi but does not prevent villus emergence (Karlsson et al., Development, 2000). Measurement of villus length between E14.5 and E18.5 reveals 8 discrete rounds of villus formation, all of which are associated with mesenchymal clusters. In an explant system, inhibition of Hh signaling prevents cluster formation and abrogates villus emergence, but does not alter Pdgfrα expression. Increasing Hh signaling increases the size of mesenchymal clusters. BrdU pulse chase experiments reveal that clusters form by aggregation of post‐mitotic Hh‐responsive cells rather than by localized proliferation of cells. Thus, mesenchymal clusters that direct the emergence of intestinal villi form in a highly patterned array that presages the regular villus pattern. Hh signaling is required for the aggregation of mesenchymal cells to form signaling clusters that promote villus emergence and dictate the shape of emerging villi. Research Support: NIH DK065850 to DLG