Bone morphogenetic proteins (BMPs) were originally identified by their ability to induce ectopic bone formation and have been shown to promote both chondrogenesis and chondrocyte hypertrophy. BMPs have recently been found to activate a membrane serine/threonine kinase signaling mechanism in a variety of cell types, but the downstream effectors of BMP signaling in chondrocyte differentiation remain unidentified. We have previously reported that BMP-2 markedly stimulates type X collagen expression in prehypertrophic chick sternal chondrocytes, and that type X collagen mRNA levels in chondrocytes cultured under serum-free (SF) conditions are elevated 3- to 5-fold within 24 h. To better define the molecular mechanisms of induction of chondrocyte hypertrophy by BMPs, we examined the effect of BMPs on type X collagen production by 15-day chick embryo sternal chondrocytes cultured under SF conditions in the presence or absence of 30 ng/ml BMP-2, BMP-4, or BMP-7. Two populations of chondrocytes were used: one representing resting cartilage isolated from the caudal third of the sterna and the second representing prehypertrophic cartilage from the cephalic third of the sterna. BMP-2, BMP-4, and BMP-7 all effectively promoted chondrocyte maturation of cephalic sternal chondrocytes as measured by high levels of alkaline phosphatase, diminished levels of type II collagen, and induction of the hypertrophic chondrocyte-specific marker, type X collagen. To test whether BMP control of type X collagen expression occurs at the transcriptional level, we utilized plasmid constructs containing the chicken collagen X promoter and 5′ flanking regions fused to a reporter gene. Constructs were transiently transfected into sternal chondrocytes cultured under SF conditions in the presence or absence of 30 ng/ml BMP-2, BMP-4, or BMP-7. A 533 bp region located 2.4-2.9 kb upstream from the type X collagen transcriptional start site was both necessary and sufficient for strong BMP responsiveness in cells destined for hypertrophy, but not in chondrocytes derived from the lower sterna.