Indian hedgehog (Ihh) is widely recognized as an essential factor for proper skeletal development. Previous in vivo studies using mutant Ihh mouse models were limited by perinatal lethality or carried out after a growth plate formed. Thus the important role of Ihh in mesenchymal cell differentiation has not been investigated. In this study, we established Prx1-Cre;Ihh(fl/fl) mice to ablate Ihh specifically in limb mesenchyme to allow us to observe the phenotype continuously from prenatal development to 3 weeks of age. Mutant mice displayed severe limb abnormalities characterized by complete lack of secondary ossification center and growth plate, indicating an essential role for Ihh in the development of these structures. Interestingly, we discovered that osteoblast differentiation and bone formation could occur in conditions of deficient Ihh. This is a novel finding that has not been observed because of the early lethality of previous Ihh mutants. Mature osteoblasts expressing osteocalcin could be detected in the center of mutant bones at postnatal day 10 (P10). Osteoclasts and blood vessel formation were also present, suggesting active bone remodeling. Histomorphometric analyses show significant increase in osteoclast number with no major changes in bone formation rate at 3 weeks of age. Mutant long bones in the limbs were deformed, with cortices comprised of irregular woven bone. Also, there was a marked decrease in gene expression of osteoblastic and osteocytic markers. Moreover, mutant long bones displayed bone dysplasia in which we observed increased osteoclast activity and partially reduced osteoblastic and osteocytic differentiation that lead ultimately to loss of bone structures at 3 weeks of age. In summary, our data show or the first time, the presence of mature osteoblasts in long bones of the limbs despite the complete loss of growth plate formation due to Ihh deficiency. These data indicate an important function for Ihh in regulating limb mesenchymal cell differentiation. (C) 2015 American Society for Bone and Mineral Research.