The unfolded protein response (UPR) is a conserved cellular response to the accumulation of proteinaceous material in endoplasmic reticulum (ER), active both in health and disease to alleviate cellular stress and improve protein folding. Multiple epiphyseal dysplasia (EDM5) is a genetic skeletal condition and a classic example of an intracellular protein aggregation disease, whereby mutant matrilin-3 forms large insoluble aggregates in the ER lumen, resulting in a specific 'disease signature' of increased expression of chaperones and foldases, and alternative splicing of the UPR effector XBP1. Matrilin-3 is expressed exclusively by chondrocytes thereby making EDM5 a perfect model system to study the role of protein aggregation in disease. In order to dissect the role of XBP1 signalling in aggregation-related conditions we crossed a p.V194D Matn3 knock-in mouse model of EDM5 with a mouse line carrying a cartilage specific deletion of XBP1 and analysed the resulting phenotype. Interestingly, the growth of mice carrying the Matn3 p.V194D mutation compounded with the cartilage specific deletion of XBP1 was severely retarded. Further phenotyping revealed increased intracellular retention of amyloid-like aggregates of mutant matrilin-3 coupled with dramatically decreased cell proliferation and increased apoptosis, suggesting a role of XBP1 signalling in protein accumulation and/or degradation. Transcriptomic analysis of chondrocytes extracted from wild type, EDM5, Xbp1-null and compound mutant lines revealed that the alternative splicing of Xbp1 is crucial in modulating levels of protein aggregation. Moreover, through detailed transcriptomic comparison with a model of metaphyseal chondrodysplasia type Schmid (MCDS), an UPR-related skeletal condition in which XBP1 was removed without overt consequences, we show for the first time that the differentiation-state of cells within the cartilage growth plate influences the UPR resulting from retention of a misfolded mutant protein and postulate that modulation of XBP1 signalling pathway presents a therapeutic target for aggregation related conditions in cells undergoing proliferation.