Mutations in the TRPV4 ion channel can lead to a range of skeletal dysplasias. However, the mechanisms by which TRPV4 mutations lead to distinct disease severity remain unknown. Here, we use CRISPR-Cas9-edited human-induced pluripotent stem cells (hiPSCs) harboring either the mild V620I or lethal T89I mutations to elucidate the differential effects on channel function and chondrogenic differentiation. We found that hiPSC-derived chondrocytes with the V620I mutation exhibited increased basal currents through TRPV4. However, both mutations showed more rapid calcium signaling with a reduced overall magnitude in response to TRPV4 agonist GSK1016790A compared to wildtype (WT). There were no differences in overall cartilaginous matrix production, but the V620I mutation resulted in reduced mechanical properties of cartilage matrix later in chondrogenesis. mRNA sequencing revealed that both mutations up-regulated several anterior HOX genes and down-regulated antioxidant genes CAT and GSTA1 throughout chondrogenesis. BMP4 treatment up-regulated several essential hypertrophic genes in WT chondrocytes; however, this hypertrophic maturation response was inhibited in mutant chondrocytes. These results indicate that the TRPV4 mutations alter BMP signaling in chondrocytes and prevent proper chondrocyte hypertrophy, as a potential mechanism for dysfunctional skeletal development. Our findings provide potential therapeutic targets for developing treatments for TRPV4-mediated skeletal dysplasias.