Cartilaginous vertebrate skeletons leave few records as fossils, unless mineralized. Here, we report outstanding preservation of early stages of cartilage differentiation, present in the Devonian vertebrate Palaeospondylus gunni. In large specimens of Palaeospondylus, enlarged, hypertrophic cell spaces (lacunae) are dominant in the cartilage matrix, each defined by thin mineralized matrix, where phosphorus and calcium co-occur. This is comparable to living endochondral cartilage, where cell hypertrophy and matrix mineralization mark the end of an ontogenetic process of cell growth and division before bone formation. New information from small individuals of Palaeospondylus demonstrates that the skeleton comprises mostly unmineralized organic matrix with fewer hypertrophic cell spaces, these occurring only in the central regions of each element. Only here has the surrounding matrix begun to mineralize, differing from the larger specimens in that phosphorus is dominant with little associated calcium at these earlier stages. This reflects cellular control of mineralization in living tissues through phosphate accumulation around hypertrophic cells, with later increase in calcium in the cartilaginous matrix. These features are always associated with endochondral bone development, but in the Palaeospondylus skeleton, this bone never develops. This skeletal state is thus far unique among vertebrates, with two alternative explanations: either later stages of endochondral bone development have been lost in Palaeospondylus, or, in a stepwise acquisition of the mineralized skeleton, these late stages have not yet evolved.