Previous studies have demonstrated the ability of bone morphogenetic proteins (BMPs) to promote chondrogenic differentiation in vitro. However, the in vivo role of BMP signaling during chondrogenesis has been unclear. We report here that BMP signaling is essential for multiple aspects of early chondrogenesis. Whereas mice deficient in type 1 receptors Bmpr1a or Bmpr1b in cartilage are able to form intact cartilaginous elements, double mutants develop a severe generalized chondrodysplasia. The majority of skeletal elements that form through endochondral ossification are absent, and the ones that form are rudimentary. The few cartilage condensations that form in double mutants are delayed in the prechondrocytic state and never form an organized growth plate. The reduced size of mutant condensations results from increased apoptosis and decreased proliferation. Moreover, the expression of cartilage-specific extracellular matrix proteins is severely reduced in mutant elements. We demonstrate that this defect in chondrocytic differentiation can be attributed to lack of Sox9, L-Sox5, and Sox6 expression in precartilaginous condensations in double mutants. In summary, our study demonstrates that BMPR1A and BMPR1B are functionally redundant during early chondrogenesis and that BMP signaling is required for chondrocyte proliferation, survival, and differentiation in vivo.