Chondrodysplasia Grebe type (CGT) is an autosomal recessive disorder characterized by severe limb shortening and dysmorphogenesis. We have identified a causative point mutation in the gene encoding the bone morphogenetic protein (BMP)–like molecule, cartilage-derived morphogenetic protein–1 (CDMP-1). The mutation substitutes a tyrosine for the first of seven highly conserved cysteine residues in the mature active domain of the protein. We demonstrate that the mutation results in a protein that is not secreted and is inactive in vitro. It produces a dominant negative effect by preventing the secretion of other, related BMP family members. We present evidence that this may occur through the formation of heterodimers. The mutation and its proposed mechanism of action provide the first human genetic indication that composite expression patterns of different BMPs dictate limb and digit morphogenesis.