We investigated the development of cartilage canals to clarify their function in the process of bone formation. Cartilage canals are tubes containing vessels that are found in the hyaline cartilage prior to the formation of a secondary ossification centre (SOC). Their exact role is still controversial and it is unclear whether they contribute to endochondral bone formation when an SOC appears. We examined the cartilage canals of the chicken femur in different developmental stages (E20, D2, 5, 7, 8, 10 and 13). To obtain a detailed picture of the cellular and molecular events within and around the canals the femur was investigated by means of three-dimensional reconstruction, light microscopy, electron microscopy, histochemistry and immunohistochemistry [vascular endothelial growth factor (VEGF), type I and II collagen]. An SOC was visible for the first time on the last embryonic day (E20). Cartilage canals were an extension of the vascularized perichondrium and its mesenchymal stem cell layers into the hyaline cartilage. The canals formed a complex network within the epiphysis and some of them penetrated into the SOC were they ended blind. The growth of the canals into the SOC was promoted by VEGF. As the development progressed the SOC increased in size and adjacent canals were incorporated into it. The canals contained chondroclasts, which opened the lacunae of hypertrophic chondrocytes, and this was followed by invasion of mesenchymal cells into the empty lacunae and formation of an osteoid layer. In older stages this layer mineralized and increased in thickness by addition of further cells. Outside the SOC cartilage canals are surrounded by osteoid, which is formed by the process of perichondral bone formation. We conclude that cartilage canals contribute to both perichondral and endochondral bone formation and that osteoblasts have the same origin in both processes.