Chicken ovalbumin upstream promoter transcription factor II (COUP-TFII) is an orphan nuclear receptor that regulates many key biological processes, including organ development and cell fate determination. Although the biological functions of COUP-TFII have been studied extensively, little is known about what regulates its gene expression, especially the role of inducible extracellular factors in triggering it. Here we report that COUP-TFII expression is regulated specifically by fibroblast growth factor 2 (FGF2), which mediates activation of the MEK1/2 pathway in mesenchymal lineage C3H10T1/2 cells. Although FGF2 treatment increased cell proliferation, the induction of COUP-TFII expression was dispensable. Instead, FGF2-primed cells in which COUP-TFII expression was induced showed a low potential for osteoblast differentiation, as evidenced by decreases in alkaline phosphatase activity and osteogenic marker gene expression. Reducing COUP-TFII by U0126 or siRNA against COUP-TFII prevented the anti-osteogenic effect of FGF2, indicating that COUP-TFII plays a key role in the FGF2-mediated determination of osteoblast differentiation capability. This report is the first to suggest that FGF2 is an extracellular inducer of COUP-TFII expression and may suppress the osteogenic potential of mesenchymal cells by inducing COUP-TFII expression prior to the onset of osteogenic differentiation.