Osteoblasts, the cells responsible for bone formation, differentiate from mesenchymal cells. Here, we discuss transcription factors that are involved in regulating the multistep molecular pathway of osteoblast differentiation. Runx2 and Osx, a newly identified zinc-finger-containing protein, are transcription factors that are expressed selectively and at high levels in osteoblasts. Null mutations of either leads to a complete absence of bone in mice. Runx2 plus its companion subunit Cbfbeta are needed for an early step in this pathway, whereas Osx is required for a subsequent step, namely the differentiation of preosteoblasts into fully functioning osteoblasts. The finding that Osx-null cells acquire a chondrocyte phenotype implies that Osx is a negative regulator of Sox9 and of the chondrocyte phenotype. This leads to the hypothesis that Osx might have a role in the segregation of osteoblasts from osteochondro-progenitors. We also discuss recent progress in studies of other transcription factors that affect skeletal patterning and development.