Recent advances in DNA sequencing have enabled mapping of genes for monogenic traits in families with small pedigrees and even in unrelated cases. We report the identification of disease-causing mutations in a rare, severe, skeletal dysplasia, studying a family of two healthy unrelated parents and two affected children using whole-exome sequencing. The two affected daughters have clinical and radiographic features suggestive of anauxetic dysplasia (OMIM 607095), a rare form of dwarfism caused by mutations of RMRP. However, mutations of RMRP were excluded in this family by direct sequencing. Our studies identified two novel compound heterozygous loss-of-function mutations in POP1, which encodes a core component of the RNase mitochondrial RNA processing (RNase MRP) complex that directly interacts with the RMRP RNA domains that are affected in anauxetic dysplasia. We demonstrate that these mutations impair the integrity and activity of this complex and that they impair cell proliferation, providing likely molecular and cellular mechanisms by which POP1 mutations cause this severe skeletal dysplasia.