In teleosts, the embryonic fin fold consists of a peridermis, an underlying epidermis and a small number of mesenchymal cells. Beginning from such a simple structure, the fin skeletons, including the proximal and distal radials and lepidotrichia (finrays), develop in the dorsal fin fold at the larval stage. Their process of skeletogenesis and embryonic origin are unclear. Using flounder larvae, we report the differentiation process for chondrocytes and scleroblasts prior to fin skeletogenesis and the effects of retinoic acid (RA) on it. In early larvae, the mesenchymal cells grow between the epidermis and spinal cord to form a line of periodical condensations, which are proximal radial primordia, to produce chondrocytes. The prescleroblasts, which ossify the proximal radial cartilages, differentiate in the mesenchymal cells remaining between the cartilages. Then, mesenchymal condensations occur between the distal ends of the proximal radials, forming distal radial primordia, to produce chondrocytes. Simultaneously, condensations occur between the distal radial primordia and peridermis, which are lepidotrichia primordia, to produce prescleroblasts. Exogenous RA specifically inhibits the mesenchymal condensation prior to the proximal radial formation together with the down-regulation of sonic hedgehog (shh) and patched (pta) expression, resulting in the loss of proximal radials. Thus, it was indicated that differentiation of the precursor cells of radials and lepidotrichia begins in the proximal part of the fin fold and that the initial mesenchymal condensation prior to the proximal radial formation is highly susceptible to the effects of RA. Lepidotrichia formation does not occur where proximal radials are absent, indicating that lepidotrichia differentiation requires interaction with the radial cartilages. To examine the suggestion that neural crest cells contribute to the medial fin skeletons, we localized the HNK-1 positive cells in flounder embryos and slug and msxb-positive cells in pufferfish, Fugu rubripes, embryos. That the positive cells commonly arrive at the proximal part of the fin fold does not contradict the suggestion, but their final destiny as radial chondrocytes or lepidotrichia scleroblasts, should be further investigated.