During endochondral ossification, cartilage template is eventually replaced by bone. This process involves several well characterized, stereotypic, molecular and cellular changes in the cartilage primordia. These steps involve transition from resting to proliferative and then pre-hypertrophic to finally hypertrophic cartilage. BMP signaling is necessary and sufficient for osteogenesis. However, the specific step(s) of endochondral ossification in which BMP signaling plays an essential role is not yet known. In this study we have identified Prdx1, a known scavenger of ROS, to be expressed in pre-hypertrophic chondrocytes in a BMP signaling-dependent manner. We demonstrate that BMP signaling inhibition increases ROS levels in osteogenic cells. Further, Prdx1 regulates osteogenesis in vivo by helping maintenance of Ihh expressing pre-hypertrophic cells, in turn regulating these cells' transition into hypertrophy. Therefore, our data suggests that one of the key roles of BMP signaling in endochondral ossification is to maintain pre-hypertrophic state.