Hereditary multiple exostoses (EXT) is an autosomal dominant condition characterized by short stature and the development of bony protuberances at the ends of all the long bones. Three genetic locl have been identified by genetic linkage analysis at chromosomes 8q24.1, 11p11-13 and 19p. The EXT1 gene on chromosome 8 was recently identified and characterized. Here, we report the isolation and characterization of the EXT2 gene. This gene shows striking sequence similarity to the EXT1 gene, and we have identified a four base deletion segregating with the phenotype. Both EXT1 and EXT2 show significant homology with one additional expressed sequence tag, defining a new multigene family of proteins with potential tumour suppressor activity.