Mice with a targeted deletion of parathyroid hormone (PTH)-related peptide (PTHrP) develop a form of dyschondroplasia resulting from diminished proliferation and premature maturation of chondrocytes. Abnormal, heterogeneous populations of chondrocytes at different stages of differentiation were seen in the hypertrophic zone of the mutant growth plate. Although the homozygous null animals die within several hours of birth, mice heterozygous for PTHrP gene deletion reach adulthood, at which time they show evidence of osteopenia. Therefore, PTHrP appears to modulate cell proliferation and differentiation in both the pre and post natal period. PTH/PTHrP receptor expression in the mouse is controlled by two promoters. We recently found that, while the downstream promoter controls PTH/PTHrP receptor gene expression in bone and cartilage, it is differentially regulated in the two tissues. 1alpha,25-dihydroxyvitamin D3 downregulated the activity of the downstream promoter in osteoblasts, but not in chondrocytes, both in vivo and in vitro. Most of the biological activity of PTHrP is thought to be mediated by binding of its amino terminus to the PTH/PTHrP receptor. However, recent evidence suggests that amino acids 87-107, outside of the amino terminal binding domain, act as a nucleolar targeting signal. Chondrocytic cell line, CFK2, transfected with wild-type PTHrP cDNA showed PTHrP in the nucleoli as well as in the secretory pathway. Therefore, PTHrP appears to act as a bifunctional modulator of both chondrocyte proliferation and differentiation, through signal transduction linked to the PTH/PTHrP receptor and by its direct action in the nucleolus.