The integrated stress response (ISR) is activated by diverse forms of cellular stress, including endoplasmic reticulum (ER) stress, and is associated with diseases. However, the molecular mechanism(s) whereby the ISR impacts on differentiation is incompletely understood. Here, we exploited a mouse model of Metaphyseal Chondrodysplasia type Schmid (MCDS) to provide insight into the impact of the ISR on cell fate. We show the protein kinase RNA-like ER kinase (PERK) pathway that mediates preferential synthesis of ATF4 and CHOP, dominates in causing dysplasia by reverting chondrocyte differentiation via ATF4-directed transactivation of Sox9. Chondrocyte survival is enabled, cell autonomously, by CHOP and dual CHOP-ATF4 transactivation of Fgf21. Treatment of mutant mice with a chemical inhibitor of PERK signaling prevents the differentiation defects and ameliorates chondrodysplasia. By preventing aberrant differentiation, titrated inhibition of the ISR emerges as a rationale therapeutic strategy for stress-induced skeletal disorders.