Achondrogenesis type IB is a lethal osteochondrodysplasia caused by mutations in the diastrophic dysplasia sulfate transporter gene. How these mutations lead to the skeletal phenotype is not known. Histology of plastic-embedded skeletal fetal achondrogenesis type IB samples suggested that interterritorial epiphyseal cartilage matrix was selectively missing. Cartilage was organized in "chondrons" separated by cleft spaces; chondrocyte seriation, longitudinal septa, and, in turn, mineralized cartilaginous septa were absent. Agenesis of interterritorial matrix as the key histologic change was confirmed by immunohistology using specific markers of territorial and interterritorial matrix. Biglycan-enriched territorial matrix was preserved; decorin-enriched interterritorial areas were absent, although immunostaining was observed within chondrocytes. Thus, in achondrogenesis type IB: (1) a complex derangement in cartilage matrix assembly lies downstream of the deficient sulfate transporter activity; (2) the severely impaired decorin deposition participates in the changes in matrix organization with lack of development of normal interterritorial matrix; and (3) this change determines the lack of the necessary structural substrate for proper endochondral bone formation and explains the severe skeletal phenotype.