The proinflammatory cytokine IL-1β is elevated in many childhood chronic inflammatory diseases as well as obesity and can be associated with growth retardation. Here we show that IL-1β affects bone growth by directly disturbing the normal sequence of events in the growth plate, resulting in increased proliferation and widening of the proliferative zone, whereas the hypertrophic zone becomes disorganized, with impaired matrix structure and increased apoptosis and osteoclast activity. This was also evident in vitro: IL-1β increased proliferation and caused a G1-to-S phase shift in the cell cycle in ATDC5 chondrocytes, accompanied by a reduction in fibroblast growth factor receptor-3 (FGFR-3) and its downstream gene, the cell-cycle inhibitor p21 and its family member p57, whereas the cell-cycle promoter E2F-2 was increased. The reduction in FGFR-3, p21, and p57 was followed by delayed cell differentiation, manifested by decreases in proteoglycan synthesis, mineralization, alkaline phosphatase activity, and the expression of Sox9, RunX2, collagen type II, collagen type X, and other matrix proteins. Taken together, we suggest that IL-1β alters normal chondrogenesis and bone growth through a mechanism involving down-regulation of FGFR-3 and p21.