Sonic hedgehog (Shh) expression in the limb bud organizing centre called the zone of polarizing activity is regulated by the ZRS enhancer. Here, we examine in mouse and in a mouse limb-derived cell line the dynamic events that activate and restrict the spatial activity of the ZRS. Fibroblast growth factor (FGF) signalling in the distal limb primes the ZRS at early embryonic stages maintaining a poised, but inactive state broadly across the distal limb mesenchyme. The E26 transformation-specific transcription factor, ETV4, which is induced by FGF signalling and acts as a repressor of ZRS activity, interacts with the histone deacetylase HDAC2 and ensures that the poised ZRS remains transcriptionally inactive. Conversely, GABPα, an activator of the ZRS, recruits p300, which is associated with histone acetylation (H3K27ac) indicative of an active enhancer. Hence, the primed but inactive state of the ZRS is induced by FGF signalling and in combination with balanced histone modification events establishes the restricted, active enhancer responsible for patterning the limb bud during development.