Tendons and ligaments are critical components of the musculoskeletal system, yet the pathways specifying this lineage remain poorly defined. Through a screen of known bioactive chemicals in zebrafish, we identified a new pathway regulating tendon cell induction. We established that statin, through inhibition of the mevalonate pathway, causes an expansion of the tendon progenitor population. Co-expression and live imaging studies indicate that the expansion does not involve an increase in cell proliferation, but rather results from re-specification of cells from the neural crest-derived sox10+/sox9a+ skeletal lineage. The effect on tendon cell expansion is specific to the geranylgeranylation branch of the mevalonate pathway and mediated by inhibition of Rac activity. This work establishes a novel role for the mevalonate pathway and Rac activity in regulating specification of the tendon lineage.