Icariin, the main active compound of the traditional Chinese medicine, Epimedium, is commonly used for the clinical treatment of osteoporosis. However, the precise molecular mechanism of the therapeutic effect of icariin has not been elucidated. The aim of this study was to examine the effect of icariin on cell viability, alkaline phosphatase (ALP) activity, the amount of calcified nodules, and to delineate the molecular mechanism of icariin-enhanced bone formation by investigating the expression of bone morphogenic protein-2 (BMP-2), Smad4, Cbfa1/Runx2, osteoprotegerin (OPG), receptor activator of nuclear factor κ-B ligand (RANKL) and the OPG/RANKL ratio in the hFOB 1.19 human osteoblastic cell line. We found that icariin significantly increased the cell viability, the activity of ALP and the amount of calcified nodules in the hFOB 1.19 cells. Furthermore, we observed that icariin upregulated the expression of BMP-2, Smad4, Cbfa1/Runx2, OPG, RANKL and the OPG/RANKL ratio. Our results indicate that icariin can modulate the process of bone formation via the BMP-2/Smad4 signal transduction pathway in hFOB 1.19 cells.