The lipid mediator lysophosphatidic acid (LPA) signals via six distinct G protein-coupled receptors to mediate both unique and overlapping biological effects, including cell migration, proliferation and survival. LPA is produced extracellularly by autotaxin (ATX), a secreted lysophospholipase D, from lysophosphatidylcholine. ATX-LPA receptor signaling is essential for normal development and implicated in various (patho)physiological processes, but underlying mechanisms remain incompletely understood. Through gene targeting approaches in zebrafish and mice, we show here that loss of ATX-LPA1 signaling leads to disorganization of chondrocytes, causing severe defects in cartilage formation. Mechanistically, ATX-LPA1 signaling acts by promoting S-phase entry and cell proliferation of chondrocytes both in vitro and in vivo, at least in part through β1-integrin translocation leading to fibronectin assembly and further extracellular matrix deposition; this in turn promotes chondrocyte-matrix adhesion and cell proliferation. Thus, the ATX-LPA1 axis is a key regulator of cartilage formation.