Phosphatidylinositol-3-kinase (PI3K) is a key regulator of diverse biological processes including cell proliferation, migration, survival, and differentiation. While a role of PI3K in chondrocyte differentiation has been suggested, its precise mechanisms of action are poorly understood. Here we show that PI3K signaling can down-regulate Nkx3.2 at both mRNA and protein levels in various chondrocyte cultures in vitro. In addition, we have intriguingly found that p85β, not p85α, is specifically employed as a regulatory subunit for PI3K-mediated Nkx3.2 suppression. Furthermore, we found that regulation of Nkx3.2 by PI3K requires Rac1–PAK1, but not Akt, signaling downstream of PI3K. Finally, using embryonic limb bud cultures, ex vivo long bone cultures, and p85β knockout mice, we demonstrated that PI3K-mediated suppression of Nkx3.2 in chondrocytes plays a role in the control of cartilage hypertrophy during skeletal development in vertebrates.