The clinical literature strongly suggests that bone healing in cigarette smokers is impaired. Since cigarette smoke (CS) contains numerous polycyclic aromatic hydrocarbons (PAHs), and since dioxins impair bone formation in vivo via the Aryl Hydrocarbon Receptor (AHR), we investigated the impact of PAH/AHR signaling on chondrogenesis and on healing in a mouse tibial fracture model. We established that CS activates AHR signaling in fractures by up-regulating the AHR target gene cytochrome p4501A1 (Cyp1A1). For in vitro studies, we employed the mouse limb bud micromass chondrogenesis model. After confirming that chondrocytes express AHR during differentiation, we treated cells with a prototypical PAH found in CS, benzo(α)pyrene (BaP), or cigarette smoke extract (CSE). Both BaP and CSE strongly inhibited chondrogenesis in mesenchymal cells generated from E11 limb buds, with BaP also accelerating chondrocyte hypertrophy in cultures generated from E12 limb buds. Detection of DNA adducts in the BaP-treated cultures suggests that the distinct phenotypic effects of BaP may be due to the formation of reactive metabolites. Blockade of AHR signaling with the AHR antagonist MNF reverses the effects of BaP, but not CSE, suggesting that CSE inhibition of chondrogenesis is AHR-independent. Correlating with these results, tibial fracture calluses from BaP-treated mice were smaller and contained less mineralized tissue than vehicle controls. Overall, BaP is identified as a potent inhibitor of chondrogenesis in vitro with correlated effects on fracture healing similar to those of CS itself, suggesting a basis for PAHs as key compounds in the influence of CS on fracture repair.