Autosomal dwarfism (adw) in chickens is a growth deficiency caused by a recessive mutation. Characteristic for adw is an approximately 30% growth reduction with short shank. The adw variant was first recognized in the Cornell K-strain of White Leghorns, but the genetic causal variant remained unknown. To identify the causal variant underlying the adw phenotype, fine mapping was conducted on chromosome 1, within 52-56 Mb. This region was known to harbor the causal variant from previous linkage studies. We compared whole-genome sequence data of this region from normal-sized and adw chickens in order to find the unique causal variant. We identified a novel nonsense mutation NP_001006244.1:p.(Trp59*), in the transmembrane protein 263 gene (TMEM263), completely associated with adw. The nonsense mutation truncates the transmembrane protein within the membrane-spanning domain, expected to cause a dysfunctional protein. TMEM263 is reported to be associated with bone mineral deposition in humans, and the protein shows interaction with growth hormone 1 (GH1). Our study presents molecular genetic evidence for a novel loss-of-function variant, which likely alters body growth and development in autosomal dwarf chicken.