The mammalian Nell1 gene encodes a PKC-β1 binding protein that belongs to a new class of cell-signaling molecules controlling cell growth and differentiation. Overexpression of NELL1/Nell1 in the developing cranial sutures in both human and mouse induces craniosynostosis, the premature fusion of cranial sutures. This study describes the characterization of Nell16R (102DSJ), a recessive, neonatal-lethal point mutation in the mouse Nell1 gene, induced by N-ethyl-N-nitrosourea (ENU). The generation and sequencing of the mouse full-length cDNA (2862 bp) revealed that the Nell1 gene has an open reading frame of 2433 bp and encodes an 810 amino acid protein which is highly homologous to human and rat NELL1. Nell16R has a T→A base change that converts a codon for cysteine into a premature stop codon, resulting in severe truncation of the predicted protein product and marked reduction in steady state levels of the transcript. Immuno-histochemical analysis indicates that Nell1 is expressed in the vertebral column and is involved in osteoblast and chondrocyte differentiation. In addition to the expected alteration of cranial morphology, Nell16R mutants manifest skeletal defects in the vertebral column and ribcage, revealing a hitherto undefined role for Nell1 in signal transduction in endochondral ossification. Real-time quantitative RTPCR assays of 219 genes showed an association between the loss of Nell1 function and reduced expression of genes for extracellular matrix proteins critical for chondrogenesis and osteogenesis. Several affected genes are involved in the human cartilage disorder known as Ehlers-Danlos Syndrome (EDS) and other disorders associated with spinal curvature anomalies. Nell16R mutant mice are a new tool for elucidating basic mechanisms in osteoblast and chondrocyte differentiation in the developing skull and vertebral column and understanding how perturbations in the production of extracellular matrix proteins can lead to anomalies in these structures. The characterization of Nell1 functions using the Nell16R mouse model may further provide insights into the pathology of craniofacial defects like CS, cartilage diseases such as EDS as well as other bone and cartilage diseases