In humans, loss-of-function mutations in the gene encoding Wnt1 inducible signaling pathway protein 3 (WISP3) cause the autosomal-recessive skeletal disorder progressive pseudorheumatoid dysplasia (PPD). However, in mice there is no apparent phenotype caused by Wisp3 deficiency or overexpression. Consequently, the in vivo activities of Wisp3 have remained elusive. We cloned the zebrafish ortholog of Wisp3 and investigated its biologic activity in vivo using gain-of-function and loss-of-function approaches. Overexpression of zebrafish Wisp3 protein inhibited bone morphogenetic protein (BMP) and Wnt signaling in developing zebrafish. Conditioned medium-containing zebrafish and human Wisp3 also inhibited BMP and Wnt signaling in mammalian cells by binding to BMP ligand and to the Wnt coreceptors low-density lipoprotein receptor-related protein 6 (LRP6) and Frizzled, respectively. Wisp3 proteins containing disease-causing amino acid substitutions found in patients with PPD had reduced activity in these assays. Morpholino-mediated inhibition of zebrafish Wisp3 protein expression in developing zebrafish affected pharyngeal cartilage size and shape. These data provide a biologic assay for Wisp3, reveal a role for Wisp3 during zebrafish cartilage development, and suggest that dysregulation of BMP and/or Wnt signaling contributes to cartilage failure in humans with PPD.