During limb development, posterior Hox genes of the Hoxa- and Hoxd cluster provide positional information along the limb axis. Here we report a new function for Hoxa11 and Hoxd11 in regulating the early steps of chondrocyte differentiation. We analyzed forelimbs of Hoxa11^−/−;d11^−/− and Ulnaless mice, which are characterized by specifically shortened zeugopods. By detailed morphological and molecular analyses, we show that loss of Hoxa11 and Hoxd11 in the ulna of both mutants leads to an arrest of chondrocyte differentiation at a step before the separation into round and columnar cells takes place. Furthermore, we demonstrate that Hoxa11 and Hoxd11 act upstream of Runx2 and Shox2, two key regulators of chondrocyte differentiation. We hypothesize that Runx2 activates Shox2 in early chondrocytes, which at later stages induces Runx2 expression to regulate hypertrophic differentiation. These results give insight into mechanisms by which positional information might be translated into a specific bone pattern.