Specialized signaling centers orchestrate robust development and regeneration. Limb morphogenesis, for instance, requires interactions between the mesoderm and the signaling center apical-ectodermal ridge (AER), whose properties and role in cell fate decisions have remained challenging to dissect. To tackle this, we developed mouse embryonic stem cell (mESC)-based heterogeneous cultures and a three-dimensional (3D) organoid model, termed budoids, comprising cells with AER, surface ectoderm, and mesoderm properties. mESCs were first induced into heterogeneous cultures that self-organized into domes in 2D. Aggregating these cultures formed mesodermal organoids with certain limb bud-like features in 3D, exhibiting chondrogenesis-based symmetry breaking and elongation. Using our organoids and quantitative in situ expression profiling, we uncovered that AER-like cells support nearby limb mesoderm and fibroblast identities while enhancing tissue polarization that permits distant cartilage formation. Together, our findings provide a powerful model to study epithelial signaling center-mesoderm interactions during morphogenesis and reveal the ability of signaling center AER cells to concurrently modulate cell fate and spatial organization.