Heparan sulfate proteoglycans (HSPGs) are glycosylated extracellular or membrane-associated proteins. Their unbranched heparan sulfate (HS) disaccharide chains interact with many growth factors and receptors, modifying their activity or diffusion. The pattern of HS sulfation can be altered by the enzymes Sulf1 and Sulf2, secreted extracellular 6-O endosulfatases, which remove specific sulfate groups from HS. Modification by Sulf enzymes changes the binding affinity of HS for protein such as ligands and receptors, affecting growth factor gradients and activities. The precise expression of these sulfatases are thought to be necessary for normal development. We have examined the role of the sulf1 gene in trunk development of zebrafish embryos. sulf1 is expressed in the developing trunk musculature and as well as in midline structures such as the notochord, floorplate and hypochord. Knockdown of sulf1 with antisense morpholinos results in poor differentiation of the somitic trunk muscle, loss of the horizontal myoseptum, lack of pigmentation along the mediolateral stripe, and improper migration of the lateral line primordium. sulf1 knockdown results in a decrease in the number of Pax7-expressing dermomyotome cells, particularly along the midline where the horizontal myoseptum develops. It also leads to decreased sdf1/cxcl12 expression along the mediolateral trunk musculature. Both the Pax7 and cxcl12 expression can be restored by inhibition pharmacological inhibition of BMP signaling, which also restores formation of the myoseptum, fast muscle development, and pigmentation patterning. Lateral line migration and neuromast deposition depend on sdf1/cxcl12 and FGF signaling respectively, both of which are disrupted in sulf1 morphants. Pharmacological activation of FGF signaling can rescue the spacing of neuromast deposition in these fish. Together this data indicate that sulf1 plays a crucial role in modulating both BMP and FGF signaling along the developing myoseptum to coordinate the morphogenesis of trunk musculature, associated pigment cells, and lateral line neuromasts.