Granulin epithelin precursor (GEP) has been implicated in development, tissue regeneration, tumorigenesis, and inflammation. Herein we report that GEP stimulates chondrocyte differentiation from mesenchymal stem cells in vitro and endochondral ossification ex vivo, and GEP-knockdown mice display skeleton defects. Similar to bone morphogenic protein (BMP) 2, application of the recombinant GEP accelerates rabbit cartilage repair in vivo. GEP is a key downstream molecule of BMP2, and it is required for BMP2-mediated chondrocyte differentiation. We also show that GEP activates chondrocyte differentiation through Erk1/2 signaling and that JunB transcription factor is one of key downstream molecules of GEP in chondrocyte differentiation. Collectively, these findings reveal a novel critical role of GEP growth factor in chondrocyte differentiation and the molecular events both in vivo and in vitro.—Feng, JQ, Guo, F.-J., Jiang, B.-C., Zhang, Y., Frenkel, S., Wang, D.-W., Tang, W., Xie, Y., Liu, C.-J. Granulin epithelin precursor: a bone morphogenic protein 2-inducible growth factor that activates Erk1/2 signaling and JunB transcription factor in chondrogenesis.