Limb skeletal elements develop from a cartilage template, which is formed by the process termed chondrogenesis. This process is crucial in determining the shape and size of definitive bones in vertebrates. During chondrogenesis, aggregated mesenchymal cells undergo a highly organized process of proliferation and maturation along with secretion of extracellular matrix followed by programmed cell death and replacement by bone. The molecular mechanisms underlying this sophisticated process have been extensively studied. It has been demonstrated that several transcription factors such as Sox genes and Runx genes are indispensable for the major steps in chondrogenesis. Additionally, a number of signaling molecules including Bmps, Fgfs and Ihh/PTHrP are known to regulate chondrogenesis through highly coordinated interactions. This review is meant to provide an overview of the current knowledge of chondrogenesis with particular emphasis on the cellular and molecular aspects.