The Cyp27b1 enzyme (25-hydroxyvitamin D-1α-hydroxylase) that converts 25-hydroxyvitamin D into the active metabolite, 1,25-dihydroxyvitamin D₃ [1,25(OH)₂D₃], is expressed in kidney but also in other cell types such as chondrocytes. This suggests that local production of 1,25(OH)₂D₃ could play an important role in the differentiation of these cells. To test this hypothesis, we engineered mutant mice that do not express the Cyp27b1 gene in chondrocytes. Inactivation of both alleles of the Cyp27b1 gene led to decreased RANKL expression and reduced osteoclastogenesis, increased width of the hypertrophic zone of the growth plate at embryonic d 15.5, increased bone volume in neonatal long bones, and increased expression of the chondrocytic differentiation markers Indian Hedgehog and PTH/PTHrP receptor. The expression of the angiogenic marker VEGF was decreased, accompanied by decreased platelet/endothelial cell adhesion molecule-1 staining in the neonatal growth plate, suggesting a delay in vascularization. In parallel, we engineered strains of mice overexpressing a Cyp27b1 transgene in chondrocytes by coupling the Cyp27b1 cDNA to the collagen α₁(II) promoter. The transgenic mice showed a mirror image phenotype when compared with the tissue-specific inactivation, i.e. a reduction in the width of the hypertrophic zone of the embryonic growth plate, decreased bone volume in neonatal long bones, and inverse expression patterns of chondrocytic differentiation markers. These results support an intracrine role of 1,25(OH)₂D₃ in endochondral ossification and chondrocyte development in vivo.