To understand the molecular mechanisms by which mesenchymal cells differentiate into chondrocytes, we have used the gene for an early and abundant marker of chondrocytes, the mouse pro-alpha1(II) collagen gene (Col2a1), to delineate a minimal sequence needed for chondrocyte-specific expression and to identify the DNA-binding proteins that mediate its activity. We show here that a 48-base pair (bp) Col2a1 intron 1 sequence specifically targets the activity of a heterologous promoter to chondrocytes in transgenic mice. Mutagenesis studies of this 48-bp element identified three separate sites (sites 1-3) that were essential for its chondrocyte-specific enhancer activity in both transgenic mice and transient transfections. Mutations in sites 1 and 2 also severely inhibited the chondrocyte-specific enhancer activity of a 468-bp Col2a1 intron 1 sequence in vivo. SOX9, an SRY-related high mobility group (HMG) domain transcription factor, was previously shown to bind site 3, to bend the 48-bp DNA at this site, and to strongly activate this 48-bp enhancer as well as larger Col2a1 enhancer elements. All three sites correspond to imperfect binding sites for HMG domain proteins and appear to be involved in the formation of a large chondrocyte-specific complex between the 48-bp element, Sox9, and other protein(s). Indeed, mutations in each of the three HMG-like sites of the 48-bp element, which abolished chondrocyte-specific expression of reporter genes in transgenic mice and in transiently transfected cells, inhibited formation of this complex. Overall our results suggest a model whereby both Sox9 and these other proteins bind to several HMG-like sites in the Col2a1 gene to cooperatively control its expression in cartilage.