Clinical evidence suggests that benign cartilage lesions can progress to malignant chondrosarcoma, but the molecular events in this progression are unknown. Mice that develop benign cartilage lesions due to overexpression of Gli2 in chondrocytes developed lesions similar to chondrosarcomas when they were also deficient in p53. Gli2 overexpression and p53 deficiency had opposing effects on chondrocyte differentiation, but had additive effects negatively regulating apoptosis. Regulation of Igfbp3 expression and insulin-like growth factor (IGF) signaling by Gli and p53 integrated their effect on apoptosis. Treatment of human chondrosarcomas or fetal mouse limb explants with IGFBP3 or by blocking IGF increased the apoptosis rate, and mice expressing Gli2 developed substantially fewer tumors when they were also deficient for Igf2. IGF signaling-meditated apoptosis regulates the progression to malignant chondrosarcoma.