Mesenchymal chondrosarcomas are small-cell malignancies named as chondrosarcomas due to the focal appearance of cartilage islands. In this study, the use of in situ detection techniques on a large series of mesenchymal chondrosarcoma specimens allowed the identification of tumor-cell differentiation pathways in these neoplasms. We were able to trace all steps of chondrogenesis within mesenchymal chondrosarcoma by using characteristic marker genes of chondrocytic development. Starting from undifferentiated cells, which were negative for vimentin and any other mesenchymal marker, a substantial portion of the cellular (undifferentiated) tumor areas showed a chondroprogenitor phenotype with an onset of expression of vimentin and collagen type IIA. Cells in the chondroid areas showed the full expression panel of mature chondrocytes including type X collagen indicating focal hypertrophic differentiation of the neoplastic chondrocytes. Finally, evidence was found for transdifferentiation of the neoplastic chondrocytes to osteoblast-like cells in areas of neoplastic bone formation. These results establish mesenchymal chondrosarcoma as the very neoplasm of differentiating premesenchymal chondroprogenitor cells. The potential of neoplastic bone formation in mesenchymal chondrosarcoma introduces a new concept of neoplastic (chondrocytic) osteogenesis in musculo-skeletal malignant neoplasms, which qualifies the old dogma that neoplastic bone/osteoid formation automatically implies the diagnosis of osteosarcoma.