Indian hedgehog (Ihh) regulates proliferation and differentiation of chondrocytes in the growth plate. Although the biology of Ihh is currently well documented, its transcriptional regulation is poorly understood. δ-EF1 is a two-handed zinc finger/homeodomain transcriptional repressor. Targeted inactivation of mouse δ-EF1 leads to skeletal abnormalities including disorganized growth plates, shortening of long bones, and joint fusions, which are reminiscent of defects associated with deregulation of Ihh signaling. Here, we show that the absence of δ-EF1 results in delayed hypertrophic differentiation of chondrocytes and increased cell proliferation in the growth plate. Further, we demonstrate that δ-EF1 binds to the putative regulatory elements in intron 1 of Ihh in vitro and in vivo, resulting in down-regulation of Ihh expression. Finally, we show that δ-EF1 haploinsufficiency leads to a postnatal increase in trabecular bone mass associated with enhanced Ihh expression. In summary, we have identified δ-EF1 as an in vivo negative regulator of Ihh expression in the growth plate.