Neural crest cells (NCCs) give rise to various tissues including neurons, pigment cells, bone and cartilage in the head. Distal-less homeobox 5 (Dlx5) is involved in both jaw patterning and differentiation of NCC-derivatives. In this study, we investigated the differentiation potential of head mesenchyme by forcing Dlx5 to be expressed in mouse NCC (NCCDlx5). In NCCDlx5 mice, differentiation of dermis and pigment cells were enhanced with ectopic cartilage (ec) and heterotopic bone (hb) in different layers at the cranial vertex. The ec and hb were derived from the early migrating mesenchyme (EMM), the non-skeletogenic cell population located above skeletogenic supraorbital mesenchyme (SOM). The ec developed within Foxc1+-dura mater with increased PDGFRα signalling, and the hb formed with upregulation of BMP and WNT/β-catenin signallings in Dermo1+-dermal layer from E11.5. Since dermal cells express Runx2 and Msx2 in the control, osteogenic potential in dermal cells seemed to be inhibited by an anti-osteogenic function of Msx2 in normal context. We propose that, after the non-skeletogenic commitment, the EMM is divided into dermis and meninges by E11.5 in normal development. Two distinct responses of the EMM, chondrogenesis and osteogenesis, to Dlx5-augmentation in the NCCDlx5 strongly support this idea.