We investigated the effects of bone morphogenetic protein (BMP)-2, a member of the transforming growth factor- superfamily, on the regulation of the chondrocyte phenotype, and we identified signaling molecules involved in this regulation. BMP-2 triggers three concomitant responses in mouse primary chondrocytes and chondrocytic MC615 cells. First, BMP-2 stimulates expression or synthesis of type II collagen. Second, BMP-2 induces expression of molecular markers characteristic of pre-and hypertrophic chondrocytes, such as Indian hedgehog, parathyroid hormone/parathyroid hormonerelated peptide receptor, type X collagen, and alkaline phosphatase. Third, BMP-2 induces osteocalcin expression, a specific trait of osteoblasts. Constitutively active forms of transforming growth factor- family type I receptors and Smad proteins were overexpressed to address their role in this process. Activin receptor-like kinase (ALK)-1, ALK-2, ALK-3, and ALK-6 were able to reproduce the hypertrophic maturation of chondrocytes induced by BMP-2. In addition, ALK-2 mimicked further the osteoblastic differentiation of chondrocytes induced by BMP-2. In the presence of BMP-2, Smad1, Smad5, and Smad8 potentiated the hypertrophic maturation of chondrocytes, but failed to induce osteocalcin expression. Smad6 and Smad7 impaired chondrocytic expression and osteoblastic differentiation induced by BMP-2. Thus, our results indicate that Smad-mediated pathways are essential for the regulation of the different steps of chondrocyte and osteoblast differentiation and suggest that additional Smad-independent pathways might be activated by ALK-2.The development of long bones involves first the formation of cartilage primordia, which prefigure the future skeletal elements, and the replacement of the cartilage by bone. The formation of cartilage is initiated by the condensation and differentiation of mesenchymal cells into chondrocytes. This commitment to the skeletal lineage progresses through a switch in gene activation and results in the production of a cartilage matrix, which contains predominantly type II collagen and the proteoglycan aggrecan. During replacement of cartilage by bone through the sequence of events called endochondral ossification, chondrocytes enter a process of maturation, characterized by cellular hypertrophy and onset of type X collagen expression (reviewed in Ref. 1). This is followed by vascular invasion, matrix degradation, and replacement of the cartilage by bone marrow and trabecular bone.Chondrocyte differentiation and maturation is thus a central cellular aspect of skeletal development, and a molecular understanding of skeletogenesis requires an understanding of how expression of the chondrocytic phenotype is regulated. The fate of the skeletal cells and their precursors is controlled by the extracellular matrix, growth factors, hormones, and cytokines. Bone morphogenetic proteins (BMPs) 1 play a particularly important role in skeletal formation. Although BMPs have been shown to have a broad spectrum of action on proliferati...