Endochondral ossification comprises a cascade of cell differentiation culminating in chondrocyte hypertrophy and is negatively controlled by soluble environmental mediators at several checkpoints. Proteinases modulate this control by processing protein signals and/or their receptors. Here, we show that insulin-like growth factor I can trigger hypertrophic development by stimulating production and/or activation of proteinases in some populations of chick embryo chondrocytes. Cell surface targets of the enzymes include 1,25-dihydroxyvitamin D3 membraneassociated rapid response steroid receptor (1,25 D3 MARRS receptor), also known as ERp57/GRp58/ERp60. This protein is anchored to the outer surface of plasma membranes and inhibits late chondrocyte differentiation after binding of 1,25-dihydroxyvitamin D3. Upon treatment with insulin-like growth factor I, 1,25 D3 MARRS receptor is cleaved into two fragments of ϳ30 and 22 kDa. This process is abrogated along with hypertrophic development by E-64 or cystatin C, inhibitors of cysteine proteinases. Cell differentiation is enhanced by treatment with antibodies to 1,25 D3 MARRS receptor that either block binding of the inhibitory ligand 1,25-dihydroxyvitamin D3 or inactivate 1,25 D3 MARRS receptor left intact after treatment with proteinase inhibitors. Therefore, proteolytic shedding of 1,25 D3 MARRS receptor constitutes a molecular mechanism eliminating the 1,25-dihydroxyvitamin D3-induced barrier against late cartilage differentiation and is a potentially important step during endochondral ossification or cartilage degeneration in osteoarthritis.Endochondral ossification is one of two mechanisms of bone formation in vertebrates and is particularly important for development, growth, and repair of long bones. During this process, differentiated cartilage cells transit through a cascade of late differentiation events that sequentially include cell proliferation and several steps of chondrocyte maturation culminating in hypertrophy. After invasion of blood vessels into hypertrophic cartilage from subchondral bone, the majority of hypertrophic cells undergo apoptosis and the cartilage template is remodeled into trabecular bone. Each chondrocyte differentiation phase is accompanied by a change in cell shape and the expression of stage-specific markers. The cells produce collagens II, IX, and XI at all stages, albeit at different steady-state levels. In addition, the expression repertoire includes collagen VI and matrilin 1 at early proliferative stages and Indian hedgehog during pre-hypertrophy. Collagen X and alkaline phosphatase are well established surrogate markers for the overtly hypertrophic stage of late chondrocyte differentiation. Hypertrophic chondrocytes also reduce, or even terminate, their production of collagen II (1-6). Collagen X is not made in the superficial or intermediate layers of normal articular cartilage but is strongly up-regulated in osteoarthritic cartilage, particularly near surface fissures. For this reason, it has been speculated that osteoarthrit...