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Atf4 is a leucine zipper-containing transcription factor that activates osteocalcin (Ocn) in osteoblasts and indian hedgehog (Ihh) in chondrocytes. The relative contribution of Atf4 in chondrocytes and osteoblasts to the regulation of skeletal development and bone formation is poorly understood. Investigations of the Atf4(-/-);Col2a1-Atf4 mouse model, in which Atf4 is selectively overexpressed in chondrocytes in an Atf4-null background, demonstrate that chondrocyte-derived Atf4 regulates osteogenesis during development and bone remodeling postnatally. Atf4 overexpression in chondrocytes of the Atf4(-/-);Col2a1-Atf4 double mutants corrects the reduction in stature and limb in Atf4(-/-) embryos and rectifies the decrease in Ihh expression, Hh signaling, proliferation and accelerated hypertrophy that characterize the Atf4(-/-) developing growth plate cartilages. Unexpectedly, this genetic manipulation also restores the expression of osteoblastic marker genes, namely Ocn and bone sialoprotein, in Atf4(-/-) developing bones. In Atf4(-/-);Col2a1-Atf4 adult mice, all the defective bone parameters found in Atf4(-/-) mice, including bone volume, trabecular number and thickness, and bone formation rate, are rescued. In addition, the conditioned media of ex vivo cultures from wild-type or Atf4(-/-);Col2a1-Atf4, but not Atf4(-/-) cartilage, corrects the differentiation defects of Atf4(-/-) bone marrow stromal cells and Ihh-blocking antibody eliminates this effect. Together, these data indicate that Atf4 in chondrocytes is required for normal Ihh expression and for its paracrine effect on osteoblast differentiation. Therefore, the cell-autonomous role of Atf4 in chondrocytes dominates the role of Atf4 in osteoblasts during development for the control of early osteogenesis and skeletal growth.