Bone formation during skeletal development involves a complex coordination among multiple cell types and tissues. Bone is of crucial importance for the human body, providing skeletal support, and serving as a home for the formation of hematopoietic cells and as a reservoir for calcium and phosphate. Bone is also continuously remodeled in vertebrates throughout life. Osteoblasts and osteoclasts are specialized cells responsible for bone formation and resorption, respectively. Early development of the vertebrate skeleton depends on genes that control the distribution and proliferation of cells from cranial neural crest, sclerotomes, and lateral plate mesoderm into mesenchymal condensations, where cells differentiate to osteoblasts. Significant progress has been made over the past decade in our understanding of the molecular framework that controls osteogenic differentiation. A large number of morphogens, signaling molecules, and transcriptional regulators have been implicated in regulating bone development. A partial list of these factors includes the Wnt/beta-catenin, TGF-beta/BMP, FGF, Notch and Hedgehog signaling pathways, and Runx2, Osterix, ATF4, TAZ, and NFATc1 transcriptional factors. A better understanding of molecular mechanisms behind osteogenic differentiation would not only help us to identify pathogenic causes of bone and skeletal diseases but also lead to the development of targeted therapies for these diseases.