The mechanisms by which the early limb cell condensations and interzone mesenchyme give rise to skeletal elements and joints are poorly understood. Previous work from this laboratory has shown that the extracellular matrix protein tenascin-C is associated with articular cartilage and joint tissue development; others have shown that tenascin-C may exert its biological activities via interactions with cell surface receptors, such as syndecans. To further analyze the roles of tenascin-C and its putative receptors in skeletal development, we carried out a detailed in situ hybridization analysis of tenascin-C and syndecan-3 gene expression during development of chick limb skeletal elements and joints. We found that as the early mesenchymal condensations chondrify around day 5 (E5) of development, they become surrounded by a thick syndecan-3 rich perichondrium while tenascin-C transcripts are much fewer and restricted to diaphyseal perichondrium and developing interzones. Similar patterns were observed as distal carpal and digit condensations formed in older embryos. As the cartilaginous long bone models elongated proximo-distally and joint formation proceeded with age, we observed that syndecan-3 transcripts decrease significantly along the diaphysis and remain very abundant along the metaphysis and in the epiphyseal articular cap and interzone. Conversely, tenascin-C RNAs remain abundant along the diaphysis and begin to increase at the epiphysis and in interzone-derived tissues, such as menisci and joint capsule. By E10, the skeletal elements have well-defined morphologies, endochondral ossification has initiated in their diaphysis, and diaphyseal perichondrium has become periosteum. These developmental changes were accompanied by equally marked changes in gene expression; these included a marked increase in tenascin-C gene expression in articular cap, fragmentation of tenascin-C gene expression along the periosteum, reinitiation of syndecan-3 gene expression in periosteum, and differential gene expression in osteoprogenitor cells. The sheer complexity of the gene expression patterns documented in this study attests to the complexity of processes that bring about normal skelatogenesis. Clearly, tenascin-C and syndecan-3 appear to be closely associated with several of these processes, particularly in establishing tissue boundaries (perichondrium and periosteum) between condensations and surrounding mesenchymal cells, in regulating perichondral cell differentiation and incorporation into the growing skeletal elements, and in the genesis of epiphyseal chondrocytes and associated joint tissues.