Fracture healing is a multistage process characterized by inflammation, cartilage formation, bone deposition, and remodeling. Chondrocytes are important in producing cartilage that forms the initial anlagen for the hard callus needed to stabilize the fracture site. We examined the role of FOXO1 by selective ablation of FOXO1 in chondrocytes mediated by Col2α1 driven Cre recombinase. Experimental mice with lineage-specific FOXO1 deletion (Col2α1Cre⁺FOXO1^L/L) and negative control littermates (Col2α1Cre⁻FOXO1^L/L) were used for in vivo, closed fracture studies. Unexpectedly, we found that in the early phases of fracture healing, FOXO1 deletion significantly increased the amount of cartilage formed, whereas, in later periods, FOXO1 deletion led to a greater loss of cartilage. FOXO1 was functionally important as its deletion in chondrocytes led to diminished bone formation on day 22. Mechanistically, the early effects of FOXO1 deletion were linked to increased proliferation of chondrocytes through enhanced expression of cell cycle genes that promote proliferation and reduced expression of those that inhibit it and increased expression of cartilage matrix genes. At later time points experimental mice with FOXO1 deletion had greater loss of cartilage, enhanced formation of osteoclasts, increased IL-6 and reduced numbers of M2 macrophages. These results identify FOXO1 as a transcription factor that regulates chondrocyte behavior by limiting the early expansion of cartilage and preventing rapid cartilage loss at later phases.