Chondrogenesis is a multistep process that is essential for endochondral bone formation. Previous results have indicated a role for β-catenin and Wnt signaling in this pathway. Here we show the existence of physical and functional interactions between β-catenin and Sox9, a transcription factor that is required in successive steps of chondrogenesis. In vivo, either overexpression of Sox9 or inactivation of β-catenin in chondrocytes of mouse embryos produces a similar phenotype of dwarfism with decreased chondrocyte proliferation, delayed hypertrophic chondrocyte differentiation, and endochondral bone formation. Furthermore, either inactivation of Sox9 or stabilization of β-catenin in chondrocytes also produces a similar phenotype of severe chondrodysplasia. Sox9 markedly inhibits activation of β-catenin-dependent promoters and stimulates degradation of β-catenin by the ubiquitination/proteasome pathway. Likewise, Sox9 inhibits β-catenin-mediated secondary axis induction in Xenopus embryos. β-Catenin physically interacts through its Armadillo repeats with the C-terminal transactivation domain of Sox9. We hypothesize that the inhibitory activity of Sox9 is caused by its ability to compete with Tcf/Lef for binding to β-catenin, followed by degradation of β-catenin. Our results strongly suggest that chondrogenesis is controlled by interactions between Sox9 and the Wnt/β-catenin signaling pathway.