Chondrogenesis is a well-coordinated multi-step differentiation process in which resting chondrocytes produce terminally differentiated hypertrophic chondrocytes through a proliferative stage. Here we show that phosphoinositide-3 kinase (PI3K) and its major downstream molecule, Akt, a serine-threonine kinase, play pivotal roles in this process. Akt signaling was activated in resting and proliferative chondrocytes but was reduced during terminal differentiation. We adopted two chondrocyte differentiation systems to investigate the roles of PI3K/Akt signaling in chondrogenesis. First, we employed an embryonic forelimb organ culture of transgenic mice expressing an Akt-Mer (a ligand-binding domain of a mutated estrogen receptor) fusion protein whose kinase activity was conditionally activated by treatment with 4-hydroxytamoxifen (4OHT). Activation of Akt signaling in embryonic chondrogenesis enhanced chondrocyte proliferation and inhibited hypertrophic differentiation, presumably due to the suppressed expression of Runx2, a transcription factor critical for chondrocyte terminal differentiation. Conversely, inhibition of PI3K by its inhibitor accelerated terminal hypertrophic differentiation, resulting in a shorter bone. Essentially the same results were obtained in a second line of experiments using human synovial stromal cells (hSSCs), which are mesenchymal progenitor cells isolated from adult joints. These findings demonstrate that PI3K/Akt signaling is a key regulator in terminal chondrocyte differentiation in both embryonic and adult chondrogenesis.