Formation of cartilage and bone involves sequential processes in which undifferentiated mesenchyme aggregates into primordial condensations that subsequently grow and differentiate, eventually forming the adult skeleton. Although much has been learned about the structural molecules that compose cartilage and bone, little is known about the nuclear factors that regulate chondrogenesis and osteogenesis. MHox is a homeo box-containing gene that is expressed in the mesenchyme of facial, limb, and vertebral skeletal precursors during mouse embryogenesis. MHox expression has been shown to require epithelial-derived signals, suggesting that MHox may regulate the epithelial-mesenchymal interactions required for skeletal organogenesis. To determine the functions of MHox, we generated a loss-of-function mutation in the MHox gene. Mice homozygous for a mutant MHox allele die soon after birth and exhibit defects of skeletogenesis, involving the loss or malformation of craniofacial, limb, and vertebral skeletal structures. The affected skeletal elements are derived from the cranial neural crest, as well as somitic and lateral mesoderm. Analysis of the mutant phenotype during ontogeny demonstrated a defect in the formation and growth of chondrogenic and osteogenic precursors. These findings provide evidence that MHox regulates the formation of preskeletal condensations from undifferentiated mesenchyme.