Developmental patterning and growth of the vertebrate digestive and respiratory tracts requires interactions between the epithelial endoderm and adjacent mesoderm. The esophagus is a specialized structure that connects the digestive and respiratory systems and its normal development is critical for both. Shh signaling from the epithelium regulates related aspects of mammalian and zebrafish digestive organ development and has a prominent effect on esophageal morphogenesis. The mechanisms underlying esophageal malformations, however, are poorly understood. Here, we show that zebrafish Ihha signaling from the epithelium acting in parallel, but independently of Shh, controls epithelial and mesenchymal cell proliferation and differentiation of smooth muscles and neurons in the gut and swimbladder. In zebrafish ihha mutants, the esophageal and swimbladder epithelium is dysmorphic, and expression of fgf10 in adjacent mesenchymal cells is affected. Analysis of the development of the esophagus and swimbladder in fgf10 mutant daedalus (dae) and compound dae/ihha mutants shows that the Ihha-Fgf10 regulatory interaction is realized through a signaling feedback loop between the Ihha-expressing epithelium and Fgf10-expressing mesenchyme. Disruption of this loop further affects the esophageal and swimbladder epithelium in ihha mutants, and Ihha acts in parallel to but independently of Shha in this process. These findings contribute to the understanding of epithelial-mesenchymal interactions and highlight an interaction between Hh and Fgf signaling pathways during esophagus and swimbladder development.