To identify novel molecules regulating chondrogenesis and cartilage development, we screened a cartilage-specific expressed sequence tag data base. Cytokine-like 1 (Cytl1), a possible cytokine candidate with unknown function that was originally identified in bone marrow-derived CD34-positive cells, was selected for functional characterization. In view of the initial observation that Cytl1 is predominantly expressed in chondrocytes and cartilage, we investigated its possible role in chondrogenesis and hypertrophic maturation of chondrocytes. Cytl1 expression was very low in mesenchymal cells, dramatically increased during chondrogenesis, and decreased during hypertrophic maturation, both in vivo and in vitro. The role of Cytl1 in chondrogenesis and hypertrophic maturation was examined by treating chondrifying mesenchymal cells with exogenous Cytl1 or ectopic expression of Cytl1. Notably, exogenous Cytl1 caused chondrogenic differentiation of mouse limb bud mesenchymal cells during micromass culture. Lentivirus-mediated overexpression of Cytl1 additionally induced chondrogenic differentiation of mesenchymal cells. However, Cytl1 did not affect the hypertrophic maturation of chondrocytes. Cytl1 exerted its chondrogenic effect via stimulation of Sox9 transcriptional activity. In addition, Cytl1 caused expression of insulin-like growth factor 1, which has a capacity to induce chondrogenesis. Thus, our results collectively suggest that chondrocyte-specific Cytl1 regulates chondrogenesis as a novel autocrine factor, but not hypertrophic maturation of chondrocytes during cartilage development.