Skeletal development involves complex coordination among multiple cell types and tissues. In long bones, a cartilage template surrounded by the perichondrium is first laid down and is subsequently replaced by bone marrow and bone, during a process named endochondral ossification. Cells in the cartilage template and the surrounding perichondrium are derived from mesenchymal cells, which condense locally. In contrast, many cell types that make up mature bone and in particular the bone marrow are brought in by the vasculature. Three tissues appear to be the main players in the initiation of endochondral ossification: the cartilage, the adjacent perichondrium, and the invading vasculature. Interactions among these tissues are synchronized by a large number of secreted and intracellular factors, many of which have been identified in the past 10 years. Some of these factors primarily control cartilage differentiation, while others regulate bone formation and/or angiogenesis. Understanding how these factors operate during skeletal development through the analyses of genetically altered mice depends on being able to distinguish the effect of these molecules on the different cell types that comprise the skeleton. This review will discuss the complexity of skeletal phenotypes, which arises from the tightly regulated, complex interactions among the three tissues involved in bone development. Specific examples illustrate how gene functions may be further assessed using new approaches including genetic and tissue manipulations.