Fibronectin (FN) is an extracellular matrix glycoprotein essential for the development and function of major vertebrate organ systems. Mutations in FN result in an autosomal dominant skeletal dysplasia termed corner fracture-type spondylometaphyseal dysplasia (SMDCF). The precise pathomechanisms through which mutant FN induces impaired skeletal development remain elusive. Here, we have generated patient-derived induced pluripotent stem cells as a cell culture model for SMDCF to investigate the consequences of FN mutations on mesenchymal stem cells (MSCs) and their differentiation into cartilage-producing chondrocytes. In line with our previous data, FN mutations disrupted protein secretion from MSCs, causing a notable increase in intracellular FN and a significant decrease in extracellular FN levels. Analyses of plasma samples from SMDCF patients also showed reduced FN in circulation. FN and endoplasmic reticulum (ER) protein folding chaperones (BIP, HSP47) accumulated in MSCs within ribosome-covered cytosolic vesicles that emerged from the ER. Massive amounts of these vesicles were not cleared from the cytosol, and a smaller subset showed the presence of lysosomal markers. The accumulation of intracellular FN and ER proteins elevated cellular stress markers and altered mitochondrial structure. Bulk RNA sequencing revealed a specific transcriptomic dysregulation of the patient-derived cells relative to controls. Analysis of MSC differentiation into chondrocytes showed impaired mesenchymal condensation, reduced chondrogenic markers, and compromised cell proliferation in mutant cells. Moreover, FN mutant cells exhibited significantly lower transforming growth factor beta-1 (TGFβ1) expression, crucial for mesenchymal condensation. Exogenous FN or TGFβ1 supplementation effectively improved the MSC condensation and promoted chondrogenesis in FN mutant cells. These findings demonstrate the cellular consequences of FN mutations in SMDCF and explain the molecular pathways involved in the associated altered chondrogenesis.