Condensation is the pivotal stage in the development of skeletal and other mesenchymal tissues. It occurs when a previously dispersed population of cells gathers together to differentiate into a single cell/tissue type such as cartilage, bone, muscle, tendon, kidney, and lung and is the earliest stage during organ formation when tissuespecific genes are upregulated. We present a synopsis of our current understanding of how condensations are initiated and grown, how their boundaries and sizes are set, how condensation ceases, and how overt differentiation begins. Extracellular matrix molecules, cell surface receptors and cell adhesion molecules, such as fibronectin, tenascin, syndecan, and N-CAM, initiate condensation formation and set condensation boundaries. Hox genes (Hoxd-11-13) and other transcription factors (CFKH-1, MFH-1, osf-2), modulate the proliferation of cells within condensations. Cell adhesion is ensured indirectly through Hox genes (Hoxa-2, Hoxd-13), and directly via cell adhesion molecules (N-CAM and N-cadherin). Subsequent growth of condensations is regulated by BMPs, which activate Pax-2, Hoxa-2 and Hoxd-11 among other genes. Growth of a condensation ceases when Noggin inhibits BMP signalling, setting the stage for transition to the next stage of skeletal development, namely overt cell differentiation. BioEssays 22:138 -147, 2000.