Sulfated glycosaminoglycan chains of extracellular matrix and cell membrane-tethered proteoglycans exert specific cellular functions by interacting with a broad spectrum of morphogens and growth factors. In humans, a congenital impaired catabolism of sulfated glycosaminoglycans is associated with severe metabolic disorders. Here, we report on the identification and characterization of a zebrafish iduronate sulfatase orthologue. By knocking down its function with antisense morpholino oligos, we demonstrate that iduronate sulfatase plays a critical role during early vertebrate development and its downregulation may be responsible for severe developmental defects, including a misshapen trunk and abnormal craniofacial cartilages. We show that the altered cartilage patterning is mediated by depauperation of sox10-expressing neural crest cell precursors. Through the application of a transactivation reporter assay, we also provide a molecular proof that increased TGFbeta (Transforming Growth Factor beta) signalling is tightly associated with downregulation of iduronate sulfatase function. Our results provide an insight into the early biological impairments underlying the Hunter syndrome and suggest the use of zebrafish as a novel tool to better understand lysosomal storage disorder pathogenesis.