Osteogenesis imperfecta (OI) type V is the second most common form of OI, distinguished by hyperplastic callus formation and calcification of the interosseous membranes, in addition to the bone fragility. It is caused by a recurrent, dominant pathogenic variant (c.-14C>T) in interferon-induced transmembrane protein 5 (IFITM5). Here, we generated a conditional Rosa26-knockin mouse model to study the mechanistic consequences of the recurrent mutation. Expression of the mutant Ifitm5 in osteo-chondroprogenitor or chondrogenic cells resulted in low bone mass and growth retardation. Mutant limbs showed impaired endochondral ossification, cartilage overgrowth, and abnormal growth plate architecture. The cartilage phenotype correlates with the pathology reported in patients with OI type V. Surprisingly, expression of mutant Ifitm5 in mature osteoblasts caused no obvious skeletal abnormalities. In contrast, earlier expression in osteo-chondroprogenitors was associated with an increase in the skeletal progenitor cell population within the periosteum. Lineage tracing showed that chondrogenic cells expressing the mutant Ifitm5 had decreased differentiation into osteoblastic cells in diaphyseal bone. Moreover, mutant IFITM5 disrupted early skeletal homeostasis in part by activating ERK signaling and downstream SOX9 protein, and inhibition of these pathways partially rescued the phenotype in mutant animals. These data identify the contribution of a signaling defect altering osteo-chondroprogenitor differentiation as a driver in the pathogenesis of OI type V.