Chondrocytes interact with their neighbours through their cartilaginous extracellular matrix (ECM). Chondrocyte–matrix interactions compensate the lack of cell–cell contact and are modulated by proteoglycans and other molecules. The epiphyseal growth plate is a highly organized tissue responsible for long bone elongation. The growth plate is regulated by gradients of morphogens that are established by proteoglycans. Morphogens diffuse across the ECM, creating short- and long-range signalling that lead to the formation of a polarized tissue. Mutations affecting genes that modulate cell–matrix interactions are linked to several human disorders. Homozygous mutations of EXT1/EXT2 result in reduced synthesis and shortened heparan sulphate chains on both cell surface and matrix proteoglycans. This disrupts the diffusion gradients of morphogens and signal transduction in the epiphyseal growth plate, contributing to loss of cell polarity and osteochondroma formation. Osteochondromas are cartilage-capped bony projections arising from the metaphyses of endochondral bones adjacent to the growth plate. The osteochondroma cap is formed by cells with homozygous mutation of EXT1/EXT2 and committed stem cells/wild-type chondrocytes. Osteochondroma serves as a niche (a permissive environment), which facilitates the committed stem cells/wild-type chondrocytes to acquire secondary genetic changes to form a secondary peripheral chondrosarcoma. In such a scenario, the micro-environment is the site of the initiating processes that ultimately lead to cancer. Copyright © 2011 Pathological Society of Great Britain and Ireland. Published by John Wiley & Sons, Ltd.