The achondroplasia class of chondrodysplasias comprises the most common genetic forms of dwarfism in humans and includes achondroplasia, hypochondroplasia and thanatophoric dysplasia types I and II (TDI and TDII), which are caused by different mutations in a fibroblast growth-factor receptor FGFR3 (ref, 1), The molecular mechanism and the mediators of these FGFR3-related growth abnormalities are not known, Here we show that mutant TDII FGFR3 has a constitutive tyrosine kinase activity which can specifically activate the transcription factor Stat1 (for signal transducer and activator of transcription)(2,3). Furthermore, expression of TDII FGFR3 induced nuclear translocation of Stat1, expression of the cell-cycle inhibitor p21(WAF1/CIP1), and growth arrest of the cell. Thus, TDII FGFR3 may use Stat1 as a mediator of growth retardation in bone development, Consistent with this, Stat1 activation and increased p21(WAF1/CIP1) expression was found in the cartilage cells from the TDII fetus, but not in those from the normal fetus, Thus, abnormal STAT activation and p21(WAF1/CIP1) expression by the TDII mutant receptor may be responsible for this FGFR3-related bone disease.