During endochondral bone formation, cells in the emerging cartilaginous model transit through a cascade of several chondrocyte differentiation stages, each characterized by a specific expression repertoire of matrix macromolecules, until, as a final step, the hypertrophic cartilage is replaced by bone. In many permanent cartilage tissues, however, late differentiation of chondrocytes does not occur, due to negative regulation by the environment of the cells. Here, addressing the reason for the difference between chondrocyte fates in the chicken embryo sternum, cells from the caudal and cranial part were cultured separately in serum-free agarose gels with complements defined earlier that either permit or prevent hypertrophic development. Total RNA was extracted using a novel protocol adapted to agarose cultures, and the temporal changes in developmental stage-specific mRNA expression were monitored by Northern hybridization and phosphor image analysis. Kinetic studies of the mRNA accumulation not only showed significant differences between the expression patterns of cranial and caudal cultures after recovery, but also revealed two checkpoints of chondrocyte differentiation in keeping with cartilage development in vivo. Terminal differentiation of caudal chondrocytes is blocked at the late proliferative stage (stage Ib), while the cranial cells can undergo hypertrophic development spontaneously. The differentiation of cranial chondrocytes is reversible, since they can re-assume an early proliferative (stage Ia) phenotype under the influence of insulin, fibroblast growth factor-2 and transforming growth factor-beta in combination. Thus, the expression pattern in the latter culture resembles that of articular chondrocytes. We also provide evidence that the capacities of caudal and sternal chondrocytes to progress from the late proliferative (stage Ib) to hypertrophic stage (stage II) correlate with their differing abilities to express the Indian hedgehog gene.