Indian hedgehog (Ihh) regulates endochondral ossification in both a parathyroid hormone-related protein (PTHrP)-dependent and -independent manner by activating transcriptional mediator Gli2. However, the molecular mechanisms underlying these processes remain elusive. Here by using in vivo microarray analysis, we identify forkhead box C1 (Foxc1) as a transcriptional partner of Gli2. Foxc1 stimulates expression of Ihh target genes, including PTHrP and Col10a1, through its physical and functional interaction with Gli2. Conversely, a dominant negative Foxc1 inhibits the Ihh target gene expression. In a spontaneous loss of Foxc1 function mouse (Foxc1ch/ch), endochondral ossification is delayed and the expression of Ihh target genes inhibited. Moreover, the pathological Foxc1 missense mutation observed in the Axenfeld-Rieger syndrome impairs Gli2-Foxc1 association as well as Ihh function. Our findings suggest that Foxc1 is an important transcriptional partner of Ihh-Gli2 signalling during endochondral ossification, and that disruption of the Foxc1-Gli2 interaction causes skeletal abnormalities observed in the Axenfeld-Rieger syndrome.