The FGF signaling pathway plays essential roles in endochondral ossification by regulating osteoblast proliferation and differentiation, chondrocyte proliferation, hypertrophy, and apoptosis. FGF signaling is controlled by the complementary action of both positive and negative regulators of the signal transduction pathway. The Spry proteins are crucial regulators of receptor tyrosine kinase-mediated MAPK signaling activity. Sprys are expressed in close proximity to FGF signaling centers and regulate FGFR-ERK-mediated organogenesis. During endochondral ossification, Spry genes are expressed in prehypertrophic and hypertrophic chondrocytes. Using a conditional transgenic approach in chondrocytes in vivo, the forced expression of Spry1 resulted in neonatal lethality with accompanying skeletal abnormalities resembling thanatophoric dysplasia II, including increased apoptosis and decreased chondrocyte proliferation in the presumptive reserve and proliferating zones. In vitro chondrocyte cultures recapitulated the inhibitory effect of Spry1 on chondrocyte proliferation. In addition, overexpression of Spry1 resulted in sustained ERK activation and increased expression of p21 and STAT1. Immunoprecipitation experiments revealed that Spry1 expression in chondrocyte cultures resulted in decreased FGFR2 ubiquitination and increased FGFR2 stability. These results suggest that constitutive expression of Spry1 in chondrocytes results in attenuated FGFR2 degradation, sustained ERK activation, and up-regulation of p21Cip and STAT1 causing dysregulated chondrocyte proliferation and terminal differentiation.