To elucidate the role of PTHrP in skeletal development, we examined the proximal tibial epiphysis and metaphysis of wild-type (PTHrP-normal) 18-19-d-old fetal mice and of chondrodystrophic litter mates homozygous for a disrupted PTHrP allele generated via homologous recombination in embryonic stem cells (PTHrP-depleted). In the PTHrP-normal epiphysis, immunocytochemistry showed PTHrP to be localized in chondrocytes within the resting zone and at the junction between proliferative and hypertrophic zones. In PTHrP-depleted epiphyses, a diminished [3H]thymidine-labeling index was observed in the resting and proliferative zones accounting for reduced numbers of epiphyseal chondrocytes and for a thinner epiphyseal plate. In the mutant hypertrophic zone, enlarged chondrocytes were interspersed with clusters of cells that did not hypertrophy, but resembled resting or proliferative chondrocytes. Although the overall content of type II collagen in the epiphyseal plate was diminished, the lacunae of these non-hypertrophic chondrocytes did react for type II collagen. Moreover, cell membrane-associated chondroitin sulfate immunoreactivity was evident on these cells. Despite the presence of alkaline phosphatase activity on these nonhypertrophic chondrocytes, the adjacent cartilage matrix did not calcify and their persistence accounted for distorted chondrocyte columns and sporadic distribution of calcified cartilage. Consequently, in the metaphysis, bone deposited on the irregular and sparse scaffold of calcified cartilage and resulted in mixed spicules that did not parallel the longitudinal axis of the tibia and were, therefore, inappropriate for bone elongation. Thus, PTHrP appears to modulate both the proliferation and differentiation of chondrocytes and its absence alters the temporal and spatial sequence of epiphyseal cartilage development and of subsequent endochondral bone formation necessary for normal elongation of long bones.