Decades of work have identified the signaling pathways that regulate the differentiation of chondrocytes during bone formation, from their initial induction from mesenchymal progenitor cells to their terminal maturation into hypertrophic chondrocytes. Here, we review how multiple signaling molecules, mechanical signals and morphological cell features are integrated to activate a set of key transcription factors that determine and regulate the genetic program that induces chondrogenesis and chondrocyte differentiation. Moreover, we describe recent findings regarding the roles of several signaling pathways in modulating the proliferation and maturation of chondrocytes in the growth plate, which is the 'engine' of bone elongation.