Achondroplasia, the most common form of dwarfism in man, is a dominant genetic disorder caused by a point mutation (G380R) in the transmembrane region of fibroblast growth factor receptor 3 (FGFR3). We used gene targeting to introduce the human achondroplasia mutation into the murine FGFR3 gene. Heterozygotes for this point mutation that carried the neo cassette were normal whereas neo+ homozygotes had a phenotype similar to FGFR3-deficient mice, exhibiting bone overgrowth. This was because of interference with mRNA processing in the presence of the neo cassette. Removal of the neo selection marker by Cre/loxP recombination yielded a dominant dwarf phenotype. These mice are distinguished by their small size, shortened craniofacial area, hypoplasia of the midface with protruding incisors, distorted brain case with anteriorly shifted foramen magnum, kyphosis, and narrowed and distorted growth plates in the long bones, vertebrae, and ribs. These experiments demonstrate that achondroplasia results from a gain-of-FGFR3-function leading to inhibition of chondrocyte proliferation. These achondroplastic dwarf mice represent a reliable and useful model for developing drugs for potential treatment of the human disease.