Multiple osteochondromas (MO) is an autosomal dominant disorder caused by germline mutations in EXT1 and/or EXT2. In contrast, solitary osteochondroma (SO) is nonhereditary. Products of the EXT gene are involved in heparan sulfate (HS) biosynthesis. In this study, we investigated whether osteochondromas arise via either loss of heterozygosity (2 hits) or haploinsufficiency. An in vitro three-dimensional chondrogenic pellet model was used to compare heterozygous bone marrow-derived mesenchymal stem cells (MSCs EXT(wt/-)) of MO patients with normal MSCs and the corresponding tumor specimens (presumed EXT(-/-)). We demonstrated a second hit in EXT in five of eight osteochondromas. HS chain length and structure, in vitro chondrogenesis, and EXT expression levels were identical in both EXT(wt/-) and normal MSCs. Immunohistochemistry for HS, HS proteoglycans, and HS-dependent signaling pathways (eg, TGF-β/BMP, Wnt, and PTHLH) also showed no differences. The cartilaginous cap of osteochondroma contained a mixture of HS-positive and HS-negative cells. Because a heterozygous EXT mutation does not affect chondrogenesis, EXT, HS, or downstream signaling pathways in MSCs, our results refute the haploinsufficiency theory. We found a second hit in 63% of analyzed osteochondromas, supporting the hypothesis that osteochondromas arise via loss of heterozygosity. The detection of the second hit may depend on the ratio of HS-positive (normal) versus HS-negative (mutated) cells in the cartilaginous cap of the osteochondroma.