Variants in GDF5 are associated with human arthritis and decreased height， but the causal mutations are still unknown. We surveyed the Gdf5 locus for regulatory regions in transgenic mice and fine-mapped separate enhancers controlling expression in joints versus growing ends of long bones. A large downstream regulatory region contains a novel growth enhancer (GROW1)， which is required for normal Gdf5 expression at ends of developing bones and for normal bone lengths in vivo. Human GROW1 contains a common base-pair change that decreases enhancer activity and colocalizes with peaks of positive selection in humans. The derived allele is rare in Africa but common in Eurasia and is found in Neandertals and Denisovans. Our results suggest that an ancient regulatory variant in GROW1 has been repeatedly selected in northern environments and that past selection on growth phenotypes explains the high frequency of a GDF5 haplotype that also increases arthritis susceptibility in many human populations.