T he Sox9 transcription factor plays an essential role in promoting chondrogenesis and regulating expression of chondrocyte extracellular-matrix genes. To identify genes that interact with Sox9 in promoting chondrocyte differentiation, we screened a cDNA library generated from the murine chondrogenic ATDC5 cell line to identify activators of the collagen, type II, α 1 (Col2a1) promoter. Here we have shown that paraspeckle regulatory protein 54-kDa nuclear RNA-binding protein (p54^nrb) is an essential link between Sox9-regulated transcription and maturation of Sox9-target gene mRNA. We found that p54^nrb physically interacted with Sox9 and enhanced Sox9-dependent transcriptional activation of the Col2a1 promoter. In ATDC5 cells, p54^nrb colocalized with Sox9 protein in nuclear paraspeckle bodies, and knockdown of p54^nrb suppressed Sox9-dependent Col2a1 expression and promoter activity. We generated a p54^nrb mutant construct lacking RNA recognition motifs, and overexpression of mutant p54^nrb in ATDC5 cells markedly altered the appearance of paraspeckle bodies and inhibited the maturation of Col2a1 mRNA. The mutant p54^nrb inhibited chondrocyte differentiation of mesenchymal cells and mouse metatarsal explants. Furthermore, transgenic mice expressing the mutant p54^nrb in the chondrocyte lineage exhibited dwarfism associated with impairment of chondrogenesis. These data suggest that p54^nrb plays an important role in the regulation of Sox9 function and the formation of paraspeckle bodies during chondrogenesis.