Liver kinase b1 (Lkb1) protein kinase activity regulates cell growth and cell polarity. Here, we show Lkb1 is essential for maintaining a balance between mitotic and postmitotic cell fates in development of the mammalian skeleton. In this process, Lkb1 activity controls the progression of mitotic chondrocytes to a mature, postmitotic hypertrophic fate. Loss of this Lkb1-dependent switch leads to a dramatic expansion of immature chondrocytes and formation of enchondroma-like tumors. Pathway analysis points to a mammalian target of rapamycin complex 1-dependent mechanism that can be partially suppressed by rapamycin treatment. These findings highlight a critical requirement for integration of mammalian target of rapamycin activity into developmental decision-making during mammalian skeletogenesis.