Fibroblast growth factor-23 (FGF23) is well established to play crucial roles in the regulation of phosphate homeostasis. X-linked hypophosphatemic rickets (XLH) is characterized by impaired mineralization and growth retardation associated with elevated circulating FGF23 levels. Administration of phosphate and calcitriol is effective in improving growth retardation, but is not sufficient to fully reverse impaired growth, suggesting the existence of a disease-specific mechanism in the development of growth retardation in addition to dysregulated phosphate metabolism. However, the precise mechanisms of growth retardation in XLH remain elusive. Here, we postulated that FGF23 suppressed chondrocyte proliferation in the presence of soluble α-Klotho (sKL). In vitro and ex vivo studies revealed that FGF23 formed a protein complex with sKL through KL1 internal repeat and suppressed the linear growth of metatarsals in the presence of sKL, which was antagonized by co-incubation with neutralizing antibodies against FGF23 or by knocking-down FGFR3 expression. Additionally, FGF23 binding to FGFR3 was enhanced in the presence of sKL. Histologically, the length of the proliferating zone was diminished and was associated with decreased chondrocyte proliferation. FGF23/sKL suppressed Indian hedgehog (Ihh) expression and administration of Ihh protein partially rescued the suppressive effect of FGF23/sKL on metatarsal growth. Intraperitoneal administration of sKL in Hyp mice, a murine model for XLH, caused a decrease in the length of the proliferating zone associated with decreased chondrocyte proliferation without altering circulating phosphate levels. These findings suggest that suppression of chondrocyte proliferation by FGF23 could have a causative role in the development of growth retardation in XLH.