Cartilage formation in the embryonic limb is presaged by a cellular condensation phase that is mediated by both cell-cell and cell-matrix interactions. N-Cadherin, a Ca(2+)-dependent cell-cell adhesion molecule, is expressed at higher levels in the condensing mesenchyme, followed by down-regulation upon chondrogenic differentiation, strongly suggesting a functional role in the cellular condensation process. To further examine the role of N-cadherin, we have generated expression constructs of wild type and two deletion mutants (extracellular and intracellular) of N-cadherin in the avian replication-competent, RCAS retrovirus, and transfected primary chick limb mesenchymal cell cultures with these constructs. The effects of altered, sustained expression of N-cadherin and its mutant forms on cellular condensation, on the basis of peanut agglutinin (DNA) staining, and chondrogenesis, based on expression of chondrocyte phenotypic markers, were characterized. Cellular condensation was relatively unchanged in cultures overexpressing wild type N-cadherin, compared to controls on all days in culture. However, expression of either of the deletion mutant forms of N-cadherin resulted in decreased condensation, with the extracellular deletion mutant demonstrating the most severe inhibition, suggesting a requirement for N-cadherin mediated cell-cell adhesion and signaling in cellular condensation. Subsequent chondrogenic differentiation was also affected in all cultures overexpressing the N-cadherin constructs, on the basis of metabolic sulfate incorporation, the presence of the cartilage matrix proteins collagen type II and cartilage proteoglycan link protein, and alcian blue staining of the matrix. The characteristics of the cultures suggest that the N-cadherin mutants disrupt proper cellular condensation and subsequent chondrogenesis, while the cultures overexpressing wild type N-cadherin appear to condense normally, but are unable to proceed toward differentiation, possibly due to the prolonged maintenance of increased cell-cell adhesiveness. Thus, spatiotemporally regulated N-cadherin expression and function, at the level of both homotypic binding and linkage to the cytoskeleton, is required for chondrogenesis of limb mesenchymal cells.