Retrotransposition of processed mRNAs is a common source of novel sequence acquired during the evolution of genomes. Although the vast majority of retroposed gene copies, or retrogenes, rapidly accumulate debilitating mutations that disrupt the reading frame, a small percentage become new genes that encode functional proteins. By using a multibreed association analysis in the domestic dog, we demonstrate that expression of a recently acquired retrogene encoding fibroblast growth factor 4 (fgf4) is strongly associated with chondrodysplasia, a short-legged phenotype that defines at least 19 dog breeds including dachshund, corgi, and basset hound. These results illustrate the important role of a single evolutionary event in constraining and directing phenotypic diversity in the domestic dog.