AbstractSplit-Hand/Foot Malformation type 3 (SHFM3) is a congenital limb malformation associated with tandem duplications at the LBX1/FGF8 locus. Yet, the disease patho-mechanism remains unsolved. Here we investigate the functional consequences of SHFM3-associated rearrangements on chromatin conformation and gene expression in vivo in transgenic mice. We show that the Lbx1/Fgf8 locus consists of two separate, but interacting, regulatory domains. Re-engineering of a SHFM3-associated duplication and a newly reported inversion in mice results in restructuring of the chromatin architecture. This leads to ectopic activation of the Lbx1 and Btrc genes in the apical ectodermal ridge (AER) in an Fgf8-like pattern induced by AER-specific enhancers of Fgf8. We provide evidence that the SHFM3 phenotype is the result of a combinatorial effect on gene misexpression in the developing limb. Our results reveal insights into the molecular mechanism underlying SHFM3 and provide conceptual framework for how genomic rearrangements can cause gene misexpression and disease.