Overexpression of C-natriuretic peptide (CNP) in cartilage partially rescues achondroplasia in the mouse. Here, we studied the interaction of fibroblast growth factor (FGF) and CNP signaling in chondrocytes. CNP antagonized FGF2-induced growth arrest of rat chondrosarcoma (RCS) chondrocytes by inhibition of the Erk mitogen activated protein kinase pathway. This effect of CNP was protein kinase G-dependent and was mimicked by the cGMP analog pCPT-cGMP. FGF2-mediated activation of both MEK and Raf-1 but not Ras or FRS2 was abolished by CNP demonstrating that CNP blocks the Erk pathway at the level of Raf-1. CNP also counteracted the FGF2-mediated degradation of RCS extracellular matrix. CNP partially antagonized FGF2-induced expression, release and activation of several matrix-remodeling molecules including matrix metalloproteinase 2 (MMP2), MMP3, MMP9, MMP10 and MMP13. In addition, CNP compensated for FGF2-mediated matrix loss by upregulation of matrix production independent of its interference with FGF signaling. We conclude that CNP utilizes both direct and indirect ways to counteract the effects of FGF signaling in a chondrocyte environment.