We have developed a mouse in which the Cre recombinase gene has been targeted to exon 1 of the matrilin-1 gene (Matn1) to investigate the origins of articular chondrocytes and the development of the knee joint. Analysis of joints from offspring of Matn1-Cre/R26R crosses demonstrated that articular chondrocytes are derived from cells that have never expressed matrilin-1 whereas the remainder of the chondrocytes in the cartilage anlagen expresses matrilin-1. A band of chondrocytes adjacent to the developing interzone in the E13.5 day knee joint became apparent because these chondrocytes did not turn on expression of matrilin-1 in contrast to the other chondrocytes of the anlagen. The chondrocytes of the presumptive articular surface therefore appear to arise directly from a subpopulation of early chondrocytes that do not activate matrilin-1 expression rather than by redifferentiation from the flattened cells of the interzone. In addition, lineage tracing using both Matn1-Cre/R26R and Col2a1-Cre/R26R lines indicated that non-cartilaginous structures in the knee such as cruciate ligament, synovium and some blood vessels are formed by cells derived from the early chondrocytes of the anlagen.