Updated project metadata. Lysosomal-autophagic degradation of Endoplasmic Reticulum via autophagy (ER-phagy) is emerging as critical regulator of ER homeostasis and function. However, the molecular mechanisms governing ER-phagy are still unknown. Working in chondrocytes, we found that ER-phagy and lysosome biogenesis are co-activated by FGF signaling during hypertrophic differentiation, a mandatory step for bone formation. FGF induced ER-phagy trough IRS1-dependent inhibition of the insulin signaling and activation of MiT/TFE transcription factors, master regulators of lysosome biogenesis. MiT/TFE promoted ER-phagy through the induction of the ER-phagy receptor FAM134B. Notably, the activation of ER-phagy promotes chondrocytes differentiation and secretion of factors required for cartilage replacement by bone. Consistently, medaka fish knock-down for FAM134B have impaired ossification of cranial bones. Thus, ER-phagy is a transcriptionally regulated process that participates to cell differentiation during development.