The role of Notch signaling in cartilage differentiation and maturation in vivo was examined. Conditional Notch pathway gain and loss of function was achieved using a Cre/loxP approach to manipulate Notch signaling in cartilage precursors and chondrocytes of the developing mouse embryo. Conditional overexpression of activated Notch intracellular domain (NICD) in the chondrocyte lineage results in skeletal malformations with decreased cartilage precursor proliferation and inhibited hypertrophic chondrocyte differentiation. Likewise, expression of NICD in cartilage precursors inhibits sclerotome differentiation, resulting in severe axial skeleton abnormalities. Furthermore, conditional loss of Notch signaling via RBP-J gene deletion in the chondrocyte lineage results in increased chondrocyte proliferation and skeletal malformations consistent with the observed increase in hypertrophic chondrocytes. In addition, the Notch pathway inhibits expression of Sox9 and its target genes required for normal chondrogenic cell proliferation and differentiation. Together, our results demonstrate that appropriate Notch pathway signaling is essential for proper chondrocyte progenitor proliferation and for the normal progression of hypertrophic chondrocyte differentiation into bone in the developing appendicular and axial skeletal elements.