Skeletogenesis and bone fracture healing involve endochondral ossification, a process during which cartilaginous primordia are gradually replaced by bone tissue. In line with a role for cyclooxygenase-2 (COX-2) in the endochondral ossification process, non-steroidal anti-inflammatory drugs (NSAIDs) were reported to negatively affect bone fracture healing due to impaired osteogenesis. However, a role for COX-2 activity in the chondrogenic phase of endochondral ossification has not been addressed before. We show that COX-2 activity fulfils an important regulatory function in chondrocyte hypertrophic differentiation. Our data reveal essential cross-talk between COX-2 and bone morphogenic protein-2 (BMP-2) during chondrocyte hypertrophic differentiation. BMP-2 mediated chondrocyte hypertrophy is associated with increased COX-2 expression and pharmacological inhibition of COX-2 activity by NSAIDs (e.g., Celecoxib) decreases hypertrophic differentiation in various chondrogenic models in vitro and in vivo, while leaving early chondrogenic development unaltered. Our findings demonstrate that COX-2 activity is a novel factor partaking in chondrocyte hypertrophy in the context of endochondral ossification and these observations provide a novel etiological perspective on the adverse effects of NSAIDs on bone fracture healing and have important implications for the use of NSAIDs during endochondral skeletal development.