Proper regulation of chondrocyte differentiation is necessary for the 
morphogenesis of skeletal elements, yet little is known about the molecular 
regulation of this process. A chicken homolog of Indian hedgehog (Ihh), a member 
of the conserved Hedgehog family of secreted proteins that is expressed during 
bone formation, has now been isolated. Ihh has biological properties similar to 
those of Sonic hedgehog (Shh), including the ability to regulate the conserved 
targets Patched (Ptc) and Gli. Ihh is expressed in the prehypertrophic 
chondrocytes of cartilage elements, where it regulates the rate of hypertrophic 
differentiation. Misexpression of Ihh prevents proliferating chondrocytes from 
initiating the hypertrophic differentiation process. The direct target of Ihh 
signaling is the perichondrium, where Gli and Ptc flank the expression domain of 
Ihh. Ihh induces the expression of a second signal, parathyroid hormone-related 
protein (PTHrP), in the periarticular perichondrium. Analysis of PTHrP (-/-) 
mutant mice indicated that the PTHrP protein signals to its receptor in the 
prehypertrophic chondrocytes, thereby blocking hypertrophic differentiation. In 
vitro application of Hedgehog or PTHrP protein to normal or PTHrP (-/-) limb 
explants demonstrated that PTHrP mediates the effects of Ihh through the 
formation of a negative feedback loop that modulates the rate of chondrocyte 
differentiation.