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Aging is a major risk factor of intervertebral disc degeneration and a leading cause of back pain. Pathological changes associated with disc degeneration include the absence of large, vacuolated and reticular‐shaped nucleus pulposus cells, and appearance of smaller cells nested in lacunae. These small nested cells are conventionally described as chondrocyte‐like cells; however, their origin in the intervertebral disc is unknown. Here, using a genetic mouse model and a fate mapping strategy, we have found that the chondrocyte‐like cells in degenerating intervertebral discs are, in fact, nucleus pulposus cells. With aging, the nucleus pulposus cells fuse their cell membranes to form the nested lacunae. Next, we characterized the expression of sonic hedgehog (SHH), crucial for the maintenance of nucleus pulposus cells, and found that as intervertebral discs age and degenerate, expression of SHH and its target Brachyury is gradually lost. The results indicate that the chondrocyte‐like phenotype represents a terminal stage of differentiation preceding loss of nucleus pulposus cells and disc collapse.