The ERK and p38 MAPK pathways are well-known transducers of signals that regulate proliferation and differentiation, but precisely how these pathways control growth plate chondrocyte development is unclear. For example, the ERK pathway has been reported to be required by some investigators but inhibitory to chondrocyte development by others. Moreover, how these two pathways interact to regulate chondrocyte development is even less clear. Using primary bovine growth plate chondrocytes and murine ATDC5 cells, we demonstrate that the ERK and p38 pathways have opposing effects on proliferation but are both absolutely required for differentiation. Two factors that promote chondrocyte differentiation, brain-derived neurotrophic factor (BDNF) and C-type natriuretic peptide, increase p38 activity while decreasing, but not completely inhibiting, ERK activity. The attenuation of ERK activity by BDNF occurs via p38-dependent raf-1 inhibition. The inhibition of raf-1 by p38 is direct, because purified p38 protein inhibits the kinase activity of purified active raf-1 as well as raf-1 immunoprecipitated from chondrocyte lysates. Moreover, IGF-I, which stimulates proliferation, suppresses p38 activation. This work describes a model wherein unopposed IGF-I promotes high ERK/p38 activity ratios favoring proliferation, whereas BDNF signals a transition to differentiation by decreasing the ERK/p38 activity ratio without completely inhibiting ERK, which involves the direct inhibition of raf-1 by p38.