Pannexin 3 (Panx3) is a new member of the gap junction pannexin family, but its expression profiles and physiological function are not yet clear. We demonstrate in this study that Panx3 is expressed in cartilage and regulates chondrocyte proliferation and differentiation. Panx3 mRNA was expressed in the prehypertrophic zone in the developing growth plate and was induced during the differentiation of chondrogenic ATDC5 and N1511 cells. Panx3-transfected ATDC5 and N1511 cells promoted chondrogenic differentiation, but the suppression of endogenous Panx3 inhibited differentiation of ATDC5 cells and primary chondrocytes. Panx3-transfected ATDC5 cells reduced parathyroid hormone-induced cell proliferation and promoted the release of ATP into the extracellular space, possibly by action of Panx3 as a hemichannel. Panx3 expression in ATDC5 cells reduced intracellular cAMP levels and the activation of cAMP-response element-binding, a protein kinase A downstream effector. These Panx3 activities were blocked by anti-Panx3 antibody. Our results suggest that Panx3 functions to switch the chondrocyte cell fate from proliferation to differentiation by regulating the intracellular ATP/cAMP levels.