Mutations in human Exostosin genes (EXTs) confer a disease called Hereditary Multiple Exostoses (HME) that affects 1 in 50,000 among the general population. Patients with HME have a short stature and develop osteochondromas during childhood. Here we show that two zebrafish mutants, dackel (dak) and pinscher (pic), have cartilage defects that strongly resemble those seen in HME patients. We have previously determined that dak encodes zebrafish Ext2. Positional cloning of pic reveals that it encodes a sulphate transporter required for sulphation of glycans (Papst1). We show that although both dak and pic are required during cartilage morphogenesis, they are dispensable for chondrocyte and perichondral cell differentiation. They are also required for hypertrophic chondrocyte differentiation and osteoblast differentiation. Transplantation analysis indicates that dak(-/-) cells are usually rescued by neighbouring wild-type chondrocytes. In contrast, pic(-/-) chondrocytes always act autonomously and can disrupt the morphology of neighbouring wild-type cells. These findings lead to the development of a new model to explain the aetiology of HME.