To examine whether the transcription factor Sox9 has an essential role during the sequential steps of chondrocyte differentiation, we have used the Cre/loxP recombination system to generate mouse embryos in which either Sox9 is missing from undifferentiated mesenchymal cells of limb buds or the Sox9 gene is inactivated after chondrogenic mesenchymal condensations. Inactivation of Sox9 in limb buds before mesenchymal condensations resulted in a complete absence of both cartilage and bone, but markers for the different axes of limb development showed a normal pattern of expression. Apoptotic domains within the developing limbs were expanded, suggesting that Sox9 suppresses apoptosis. Expression of Sox5 and Sox6, two other Sox genes involved in chondrogenesis, was no longer detected. Moreover, expression of Runx2, a transcription factor needed for osteoblast differentiation, was also abolished. Embryos, in which Sox9 was deleted after mesenchymal condensations, exhibited a severe generalized chondrodysplasia, similar to that in Sox5; Sox6 double-null mutant mice. Most cells were arrested as condensed mesenchymal cells and did not undergo overt differentiation into chondrocytes. Furthermore, chondrocyte proliferation was severely inhibited and joint formation was defective. Although Indian hedgehog, Patched1, parathyroid hormone-related peptide (Pthrp), and Pth/Pthrp receptor were expressed, their expression was down-regulated. Our experiments further suggested that Sox9 is also needed to prevent conversion of proliferating chondrocytes into hypertrophic chondrocytes. We conclude that Sox9 is required during sequential steps of the chondrocyte differentiation pathway.