The repair of cartilage and bone following damage remains a clinical challenge. Current cell-based therapies rely mostly on adult mesenchymal stromal cells, but the expansion of these into correctly differentiated and functionally competent chondrocytes, which give rise to cartilage and then bone, remains problematic. Here, Naoki Nakayama and colleagues develop a small molecule-based approach that mimics the embryonic somitic chondrogenesis programme and can be used to differentiate mouse embryonic stem cells (ESCs) into chondrocytes in vitro (p. 3848). The authors first show that activation of Wnt signalling using a small molecule inhibitor of Gsk3 (CHR99021), together with inhibition of BMP signalling using a BMP type I receptor inhibitor (LDN193189), is sufficient to induce ESCs to form paraxial mesoderm-like progeny. This population, they report, expresses trunk paraxial mesoderm and somite markers but fails to express markers of sclerotome, which gives rise to cartilage. However, knowing that sonic hedgehog (Shh) and the BMP antagonist noggin are required for sclerotome induction in vivo, the researchers then demonstrate that short-term treatment of the mesodermal progeny with an Shh receptor agonist (SAG1) and the BMP inhibitor LDN193189 results in a sclerotome-like intermediate, leading to functional chondrocyte formation. When ectopically transplanted into immunocompromised mice, these chondrocytes were able to mineralise and form pieces of bone that contain marrow. This readily scalable and chemically defined method for directing chondrogenesis thus offers a promising approach for cartilage-mediated bone regeneration.