Members of the bone morphogenetic protein (BMP) superfamily, including transforming growth factor-betas (TGFβ), regulate multiple aspects of chondrogenesis. Smad7 is an intracellular inhibitor of BMP and TGFβ signaling. Studies in which Smad7 was overexpressed in chondrocytes demonstrated that Smad7 can impact chondrogenesis by inhibiting BMP signaling. However, whether Smad7 is actually required for endochondral ossification in vivo is unclear. Moreover, whether Smad7 regulates TGFβ in addition to BMP signaling in developing cartilage is unknown. In this study, we found that Smad7 is required for both axial and appendicular skeletal development. Loss of Smad7 led to impairment of the cell cycle in chondrocytes and to defects in terminal maturation. This phenotype was attributed to upregulation of both BMP and TGFβ signaling in Smad7 mutant growth plates. Moreover, Smad7-/- mice develop hypocellular cores in the medial growth plates, associated with elevated HIF1α levels, cell death, and intracellular retention of types II and X collagen. Thus, Smad7 may be required to mediate cell stress responses in the growth plate during development.