HDACs epigenetically regulate cellular processes by modifying chromatin and influencing gene expression. We previously reported that conditional deletion of Hdac3 in osteo-chondroprogenitor cells with Osx1-Cre caused severe osteopenia due to abnormal maturation of osteoblasts. The mice were also smaller. To address the abnormal longitudinal growth in these animals, the role of Hdac3 in chondrocyte differentiation was evaluated. We found that Hdac3 is highly expressed in resting and prehypertrophic growth plate chondrocytes, as well as in articular chondrocytes. Hdac3-deficient chondrocytes entered hypertrophy sooner and were smaller than normal chondrocytes. Extracellular matrix production was suppressed as glycosaminoglycan secretion and production of aggrecan, osteopontin, and matrix extracellular phosphoglycoprotein were reduced in Hdac3-deficient chondrocytes. These phenotypes led to the hypothesis that the Akt/mTOR pathway was repressed in these Hdac3-deficient chondrocytes because Akt promotes hypertrophy and matrix production in many tissues. The phosphorylation and activation of Akt, its substrate mTOR, and the mTOR substrate, p70 S6 kinase, were indeed reduced in Hdac3-deficient primary chondrocytes as well as in chondrocytes exposed to HDAC inhibitors. Expression of constitutively active Akt restored phosphorylation of mTOR and p70 S6K and matrix gene expression levels. Reduced phosphorylation of Akt and its substrates in Hdac3-deficient or HDAC inhibitors treated chondrocytes correlated with increased expression of the phosphatase Phlpp1. Hdac3 associated with a Phlpp1 promoter region containing Smad binding elements and was released after TGF β wasadded to the culture. These data demonstrate that Hdac3 controls chondrocyte hypertrophy and matrix content by repressing Phlpp1 expression and facilitating Akt activity.