Missense mutations in fibroblast growth factor receptor 3 (FGFR3) result in several types of human skeletal dysplasia, including the neonatally lethal dwarfism known as thanatophoric dysplasia. An engineered Ser(365)-->Cys substitution in mouse FGFR3, which is equivalent to a mutation associated with thanatophoric dysplasia-I in humans, has now been shown to cause severe dwarfism but not neonatal death. The mutant mice exhibit shortened limbs as a result of markedly reduced proliferation and impaired differentiation of growth plate chondrocytes. The receptor-activating mutation also resulted in downregulation of expression of the Indian hedgehog (IHH) and parathyroid hormone-related protein (PTHrP) receptor genes, both of which are important for bone growth. Interactions between FGFR3- and PTHrP-receptor-mediated signals during endochondral ossification were examined with embryonic metatarsal bones maintained in culture under defined conditions. Consistent with the in vivo observations, FGF2 inhibited bone growth in culture and induced downregulation of IHH and PTHrP receptor gene expression. Furthermore, PTHrP partially reversed the inhibition of long bone growth caused by activation of FGFR3; however, it impaired the differentiation of chondrocytes in an FGFR3-independent manner. These observations suggest that FGFR3 and IHH-PTHrP signals are transmitted by two interacting parallel pathways that mediate both overlapping and distinct functions during endochondral ossification.