Animal pigment patterns are excellent models to elucidate mechanisms of biological organization. Although theoretical simulations, such as Turing reaction-diffusion systems, recapitulate many animal patterns, they are insufficient to account for those showing a high degree of spatial organization and reproducibility. Here, we study the coat of the African striped mouse (Rhabdomys pumilio) to uncover how periodic stripes form. Combining transcriptomics, mathematical modelling and mouse transgenics, we show that the Wnt modulator Sfrp2 regulates the distribution of hair follicles and establishes an embryonic prepattern that foreshadows pigment stripes. Moreover, by developing in vivo gene editing in striped mice, we find that Sfrp2 knockout is sufficient to alter the stripe pattern. Strikingly, mutants exhibited changes in pigmentation, revealing that Sfrp2 also regulates hair colour. Lastly, through evolutionary analyses, we find that striped mice have evolved lineage-specific changes in regulatory elements surrounding Sfrp2, many of which may be implicated in modulating the expression of this gene. Altogether, our results show that a single factor controls coat pattern formation by acting both as an orienting signalling mechanism and a modulator of pigmentation. More broadly, our work provides insights into how spatial patterns are established in developing embryos and the mechanisms by which phenotypic novelty originates.