Pbx1 and a subset of homeodomain proteins collaboratively bind DNA as higher-order molecular complexes with unknown consequences for mammalian development. Pbx1 contributions were investigated through characterization of Pbx1-deficient mice. Pbx1 mutants died at embryonic day 15/16 with severe hypoplasia or aplasia of multiple organs and widespread patterning defects of the axial and appendicular skeleton. An obligatory role for Pbx1 in limb axis patterning was apparent from malformations of proximal skeletal elements, but distal structures were unaffected. In addition to multiple rib and vertebral malformations, neural crest cell-derived skeletal structures of the second branchial arch were morphologically transformed into elements reminiscent of first arch-derived cartilages. Although the skeletal malformations did not phenocopy single or compound Hox gene defects, they were restricted to domains specified by Hox proteins bearing Pbx dimerization motifs and unaccompanied by alterations in Hox gene expression. In affected domains of limbs and ribs, chondrocyte proliferation was markedly diminished and there was a notable increase of hypertrophic chondrocytes, accompanied by premature ossification of bone. The pattern of expression of genes known to regulate chondrocyte differentiation was not perturbed in Pbx1-deficient cartilage at early days of embryonic skeletogenesis, however precocious expression of Col1a1, a marker of bone formation, was found. These studies demonstrate a role for Pbx1 in multiple developmental programs and reveal a novel function in co-ordinating the extent and/or timing of proliferation with terminal differentiation. This impacts on the rate of endochondral ossification and bone formation and suggests a mechanistic basis for most of the observed skeletal malformations.