Epiphyseal chondrocytes cultured in a medium containing 10% serum may be maintained as three dimensional aggregates and differentiate terminally into hypertrophic cells. There is an attendant expression of genes encoding type X collagen and high levels of alkaline phosphatase activity. Manipulation of the serum concentration to optimal levels of 0.1 or 0.01% in this chondrocyte pellet culture system results in formation of features of developing cartilage architecture which have been observed exclusively in growth cartilage in vivo. Cells are arranged in columns radiating out from the center of the tissue, and can be divided into distinct zones corresponding to the recognized stages of chondrocyte differentiation. Elimination of the optimal serum concentration in a chemically defined medium containing insulin eliminates the events of terminal differentiation of defined cartilage architecture. Chondrocytes continue to enlarge into hypertrophic cells and synthesize type X collagen mRNA and protein, but in the absence of the optimal serum concentration, alkaline phosphatase activity does not increase and the cells retain a random orientation. Addition of thyroxine to the chemically defined medium containing insulin and growth hormone results in dose-dependent increases in both type X collagen synthesis and alkaline phosphatase activity, and reproduces the optimal serum-induced morphogenesis of chondrocytes into a columnar pattern. These experiments demonstrate the critical role of thyroxine in cartilage morphogenesis.