Mutations in the short stature homeobox gene SHOX lead to growth retardation associated with Turner, Leri-Weill dyschondrosteosis, and Langer mesomelic dysplasia syndromes, which marked the shortening of the forearms and lower legs. We report here that in contrast to the SHOX mutations in humans, Shox2 deficiency in mice leads to a virtual elimination of the stylopod in the developing limbs, while the zeugopod and autopod appear relatively normal. This phenotype is consistent with the restriction of the Shox2 expression to the proximal mesenchyme in the limb bud and later to chondrocytes associated with the forming stylopod. In the Shox2(-/-) embryo, the mesenchymal condensation for the stylopod initiates normally but the cartilaginous element subsequently fails in growth, chondrogenesis and endochondral ossification. A dramatic down-regulation of Runx2 and Runx3 could account for the lack of chondrocyte hypertrophy, while a down-regulation of Ihh expression may be responsible for a significant reduction in chondrocyte proliferation in the mutant stylopod. We further demonstrate that an enhanced and ectopic Bmp4 expression in the proximal limb of the Shox2 embryo may underlie the down-regulation of Runx2, as ectopically applied exogenous BMP4 represses Runx2 expression in the early limb bud. Moreover, we show that mouse Shox2, similar to human SHOX, can perform opposite roles on gene expression: either as a transcription activator or a repressor in different cell types. Our results establish a key role for Shox2 in regulating the growth of stylopod by controlling chondrocyte maturation via Runx2 and Runx3.