Wnt signaling is essential for many developmental processes, including skeletogenesis. To investigate the effects of Wnt signaling during skeletogenesis we studied the effects of Wnt on cultured chondrocytic cells and differentiating limb-bud mesenchyme. We showed that Wnt3a strongly repressed chondrogenesis and chondrocyte gene expression. Canonical Wnt signaling was responsible for the repression of differentiation, as evidenced by results showing that inhibition of glycogen synthase kinase 3 or expression of beta-catenin caused similar repression of differentiation. Significantly, we showed that the transcription repressor Twist1 is induced by canonical Wnt signaling. Expression of Twist1 strongly inhibited chondrocyte gene expression and short hairpin RNA knockdown of Twist1 transcript levels caused increased expression of the chondrocyte-specific genes aggrecan and type II collagen. Interestingly, Twist1 interfered with BMP2-induced expression of aggrecan and type II collagen expression and knockdown of Twist1 augmented BMP2-induced aggrecan and type II collagen expression. These data support the conclusions that Twist1 contributes to the repression of chondrogenesis and chondrocyte gene expression resulting from canonical Wnt signaling and that Twist1 interferes with BMP-dependent signaling.