Pocket proteins and cyclin-dependent kinase (CDK) inhibitors negatively regulate cell proliferation and can promote differentiation. However, which members of these gene families, which cell type they interact in, and what they do to promote differentiation in that cell type during mouse development are largely unknown. To identify the cell types in which p107 and p27 interact, we generated compound mutant mice. These mice were null for p107 and had a deletion in p27 that prevented its binding to cyclin-CDK complexes. Although a fraction of these animals survived into adulthood and looked similar to single p27 mutant mice, a larger number of animals died at birth or within a few weeks thereafter. These animals displayed defects in chondrocyte maturation and endochondral bone formation. Proliferation of chondrocytes was increased, and ectopic ossification was observed. Uncommitted mouse embryo fibroblasts could be induced into the chondrocytic lineage ex vivo, but these cells failed to mature normally. These results demonstrate that p27 carries out overlapping functions with p107 in controlling cell cycle exit during chondrocyte maturation. The phenotypic similarities between p107(-/-) p27(D51/D51) and p107(-/-) p130(-/-) mice and the cells derived from them suggest that p27 and p130 act in an analogous pathway during chondrocyte maturation.