Mesenchymal cell condensation is an essential step for cartilage development. Versican/PG-M, a large chondroitin sulfate proteoglycan, is one of the major molecules expressed in the extracellular matrix during condensation. However, its role, especially as an environment for cells being condensed, has not been elucidated. Here we showed several lines of evidence for essential roles of versican/PG-M in chondrogenic condensation using a new chondrocytic cell line, N1511. Chondrogenic stimuli (treatment with parathyroid hormone, dexamethasone, 10% serum) induced a marked increase in the transcription and protein synthesis of versican/PG-M. Stable antisense clones for versican/PG-M, depending on suppression of the expression of versican/PG-M, showed different capacities for chondrogenesis, as indicated by the expression and deposition of aggrecan, a major chondrocytic cell product. The cells in the early stages of the culture only expressed V0 and V1 forms, having more chondroitin sulfate chains among the four variants of versican/PG-M, and treatment of those cells with chondroitinase ABC suppressed subsequent chondrogenesis. Furthermore, treatment with beta-xyloside, an artificial chain initiator of chondroitin sulfate synthesis to consequently inhibit the synthesis on the core proteins, suppressed chondrogenesis. In addition, forced expression of the variant V3, which has no chondroitin sulfate chain, disrupted the deposition and organization of native versican/PG-M (V0/V1) and other extracellular matrix molecules known to be expressed during the mesenchymal condensation and resulted in the inhibition of subsequent chondrogenesis. These results suggest that versican/PG-M is involved in positively regulating the formation of the mesenchymal matrix and the onset of chondrocyte differentiation through the attached chondroitin sulfate chains.