MicroRNAs (miRNAs) play critical roles in a variety of biological processes in diverse organisms, including mammals. In the mouse skeletal system, a global reduction of miRNAs in chondrocytes causes a lethal skeletal dysplasia. However, little is known about the physiological roles of individual miRNAs in chondrocytes. The miRNA-encoding gene, Mir140, is evolutionarily conserved among vertebrates and is abundantly and almost exclusively expressed in chondrocytes. In this paper, we show that loss of Mir140 in mice causes growth defects of endochondral bones, resulting in dwarfism and craniofacial deformities. Endochondral bone development is mildly advanced due to accelerated hypertrophic differentiation of chondrocytes in Mir140-null mice. Comparison of profiles of RNA associated with Argonaute 2 (Ago2) between wild-type and Mir140-null chondrocytes identified Dnpep as a Mir140 target. As expected, Dnpep expression was increased in Mir140-null chondrocytes. Dnpep overexpression showed a mild antagonistic effect on bone morphogenetic protein (BMP) signaling at a position downstream of Smad activation. Mir140-null chondrocytes showed lower-than-normal basal BMP signaling, which was reversed by Dnpep knockdown. These results demonstrate that Mir140 is essential for normal endochondral bone development and suggest that the reduced BMP signaling caused by Dnpep upregulation plays a causal role in the skeletal defects of Mir140-null mice.