The ability of SV40 T antigen to cause abnormalities in cartilage development in transgenic mice and chimeras has been tested. The cis-regulatory elements of the COL2A1 gene were used to target expression of SV40 T antigen to differentiating chondrocytes in transgenic mice and chimeras derived from embryonal stem (ES) cells bearing the same transgene. The major phenotypic consequences of transgenic (pAL21) expression are malformed skeleton, disproportionate dwarfism, and perinatal/neonatal death. Expression of T antigen was tissue specific and in the main characteristic of the mouse alpha 1(II) collagen gene. Chondrocyte densities and levels of alpha 1(II) collagen mRNAs were reduced in the transgenic mice. Islands of cells which express cartilage characteristic genes such as type IIB procollagen, long form alpha 1(IX) collagen, alpha 2(XI) collagen, and aggrecan were found in the articular and growth cartilages of pAL21 chimeric fetuses and neonates. But these cells, which were expressing T antigen, were not properly organized into columns of proliferating chondrocytes. Levels of alpha 1(II) collagen mRNA were reduced in these chondrocytes. In addition, these cells did not express type X collagen, a marker for hypertrophic chondrocytes. The skeletal abnormality in pAL21 mice may therefore be due to a retardation of chondrocyte maturation or an impaired ability of chondrocytes to complete terminal differentiation and an associated paucity of some cartilage matrix components.