Cellular growth and differentiation are readouts of multiple signaling pathways from the intercellular and/or extracellular milieu. The extracellular matrix through the activation of cellular receptors transmits these signals. Therefore, extracellular matrix proteolysis could affect cell fate in a variety of biological events. However, the biological consequence of inadequate extracellular matrix degradation in vivo is not clear. We developed a mouse model expressing human collagenase (matrix metalloproteinase-1, MMP-1) under the control of Col2a1 promoter. The mice showed significant growth retardation during embryogenesis and a loss of the demarcation of zonal structure and columnar array of the cartilage. Immunological examination revealed increased degradation of type II collagen and upregulation of fibronectin and 5 integrin subunit in the transgenic cartilage. The resting zone and proliferating zone of the growth plate cartilage exhibited a simultaneous increase in BrdU-incorporated proliferating cells and TUNEL-positive apoptotic cells, respectively. Chondrocyte differentiation was not disturbed in the transgenic mice as evidenced by normal expression of the Ihh and type X collagen expression. These data demonstrate that type II collagen proteolysis is an important determinant for the skeletal outgrowth through modulation of chondrocyte survival and cartilagenous growth.