Fig. 9. Gli3 regulates two steps of chondrocyte differentiation: the transition from (1) distal into columnar and from (2) columnar into hypertrophic chondrocytes. Left half: Gli3 regulates the onset of hypertrophic differentiation by regulating PTHrP (yellow) expression. In distal chondrocytes Gli3 acts as a strong repressor of PTHrP expression. Ihh signaling inhibits the repressor function of Gli3 (Gli3-R) and possibly activates PTHrP expression by Gli3-mediated activation (Gli3-A). As columnar chondrocytes loose the competence to express PTHrP its expression domain is restricted to distal chondrocytes. In the most distal cells, which do not receive sufficient Ihh, the Gli3 repressor cannot be inactivated and therefore inhibits the expression of PTHrP, resulting in a stripe of PTHrP expression. Right half: Gli3 negatively regulates the differentiation of Fgfr1 expressing, distal (green) chondrocytes into columnar cells independent of PTHrP. Ihh antagonizes the repressor function of Gli3 and promotes this differentiation process.