Osteochondromas and enchondromas are the most common tumors affecting the skeleton. Osteochondromas can occur as multiple lesions, such as those in patients with hereditary multiple exostoses. Unexpectedly, while studying the role of β-catenin in cartilage development, we found that its conditional deletion induces ectopic chondroma-like cartilage formation in mice. Postnatal ablation of β-catenin in cartilage induced lateral outgrowth of the growth plate within 2 weeks after ablation. The chondroma-like masses were present in the flanking periosteum by 5 weeks and persisted for more than 6 months after β-catenin ablation. These long-lasting ectopic masses rarely contained apoptotic cells. In good correlation, transplants of β-catenin-deficient chondrocytes into athymic mice persisted for a longer period of time and resisted replacement by bone compared to control wild-type chondrocytes. In contrast, a β-catenin signaling stimulator increased cell death in control chondrocytes. Immunohistochemical analysis revealed that the amount of detectable β-catenin in cartilage cells of osteochondromas obtained from hereditary multiple exostoses patients was much lower than that in hypertrophic chondrocytes in normal human growth plates. The findings in our study indicate that loss of β-catenin expression in chondrocytes induces periosteal chondroma-like masses and may be linked to, and cause, the persistence of cartilage caps in osteochondromas.