Mutations in the sulfate transporter gene, SCL26A2, lead to cartilage proteoglycan undersulfation resulting in chondrodysplasia in humans; the phenotype is mirrored in the diastrophic dysplasia (dtd) mouse. It remains unclear whether bone shortening and deformities are caused solely by changes in the cartilage matrix, or whether chondroitin sulfate proteoglycan undersulfation affects also signalling pathways involved in cell proliferation and differentiation. Therefore we studied macromolecular sulfation in the different zones of the dtd mouse growth plate and these data were related to growth plate histomorphometry and proliferation analysis. A 2-fold increase of non-sulfated disaccharide in dtd animals compared to wild-type littermates in the resting, proliferative and hypertrophic zones was detected indicating proteoglycan undersulfation; among the three zones the highest level of undersulfation was in the resting zone. The relative height of the hypertrophic zone and the average number of cells per column in the proliferative and hypertrophic zones were significantly reduced compared to wild-types; however the total height of the growth plate was within normal values. The chondrocyte proliferation rate, measured by bromodeoxyuridine labelling, was also significantly reduced in mutant mice. Immunohistochemistry combined with expression data of the dtd growth plate demonstrated that the sulfation defect alters the distribution pattern, but not expression, of Indian hedgehog, a long range morphogen required for chondrocyte proliferation and differentiation. These data suggest that in dtd mice proteoglycan undersulfation causes reduced chondrocyte proliferation in the proliferative zone via the Indian hedgehog pathway, therefore contributing to reduced long bone growth.