Hedgehog and canonical Wnt signaling pathways and the transcription factors Runx2 and Sp7 are essential for osteoblast differentiation. Ihh is necessary for the commitment of perichondrial mesenchymal cells to Runx2+ osteoprogenitors and for the formation of the bone collar and primary spongiosa. Runx2 is needed for osteoblast differentiation during both endochondral and intramembranous ossification. It regulates the commitment of mesenchymal cells to osteoblast-lineage cells and their proliferation by inducing the expression of Hedgehog, Fgf, Wnt, Pthlh signaling pathway genes, and Dlx5. The Runx2-induced expression of Fgfr2 and Fgfr3 is important for the proliferation of osteoblast-lineage cells. Runx2 induces Sp7 expression and Runx2+ osteoprogenitors become Runx2+Sp7+ preosteoblasts. Runx2, Sp7, and canonical Wnt signaling induce the differentiation of preosteoblasts into osteoblasts. Canonical Wnt signaling, but not Sp7, enhances the proliferation of osteoblast-lineage cells. In mature osteoblasts, Runx2 plays an important role in the expression of major bone matrix protein genes, including Col1a1, Col1a2, Spp1, Ibsp, and Bglap/Bglap2. The canonical Wnt signaling pathway is also crucial for bone formation by mature osteoblasts. Sp7 is needed for osteocytes to acquire a sufficient number of processes and a reduction in these processes results in osteocyte apoptosis and cortical porosity.