Fibroblast growth factor receptor 3 (Fgfr3) is a tyrosine kinase receptor expressed in developing bone, cochlea, brain and spinal cord. Achondroplasia, the most common genetic form of dwarfism, is caused by mutations in FGFR3. Here we show that mice homozygous for a targeted disruption of Fgfr3 exhibit skeletal and inner ear defects. Skeletal defects include kyphosis, scoliosis, crooked tails and curvature and overgrowth of long bones and vertebrae. Contrasts between the skeletal phenotype and achondroplasia suggest that activation of FGFR3 causes achondroplasia. Inner ear defects include failure of pillar cell differentiation and tunnel of Corti formation and result in profound deafness. Our results demonstrate that Fgfr3 is essential for normal endochondral ossification and inner ear development.