With the aim of identifying novel genes regulating cartilage development and degeneration, we screened a cartilage-specific expressed sequence tag database. Esophageal cancer related gene 4 (ECRG4) was selected, based on the criteria of 'chondrocyte-specific' and 'unknown function.' ECRG4 expression was particularly abundant in chondrocytes and cartilage, compared to various other mouse tissues. ECRG4 is a secreted protein that undergoes cleavage after secretion. The protein is specifically expressed in chondrocytes in a manner dependent on differentiation status. The expression is very low in mesenchymal cells, and dramatically increased during chondrogenic differentiation. The ECRG4 level in differentiated chondrocytes is decreased during hypertrophic maturation, both in vitro and in vivo, and additionally in dedifferentiating chondrocytes induced by interleukin-1beta or serial subculture, chondrocytes of human osteoarthritic cartilage and experimental mouse osteoarthritic cartilage. However, ectopic expression or exogenous ECRG4 treatment in a primary culture cell system does not affect chondrogenesis of mesenchymal cells, hypertrophic maturation of chondrocytes or dedifferentiation of differentiated chondrocytes. Additionally, cartilage development and organization of extracellular matrix are not affected in transgenic mice overexpressing ECRG4 in cartilage tissue. However, ectopic expression of ECRG4 reduced proliferation of primary culture chondrocytes. While the underlying mechanisms of ECRG4 expression and specific roles remain to be elucidated in more detail, our results support its function as a marker of differentiated articular chondrocytes and cartilage destruction.