Osterix is a transcription factor crucial for the normal development of the osteoblast. Here we have investigated whether the osteogenic differentiation of murine embryonic stem (ES) cells can be induced by overexpression of osterix. Differentiation was initiated by formation of embryoid bodies (EB) which were then dispersed and cultured in alpha-minimum essential medium supplemented with L-ascorbate phosphate and alpha-glycerophosphate for up to 21 days. osterix was found to induce expression of several osteoblast-specific markers, as confirmed by immunostaining and real-time RT-PCR. The expression of genes encoding osteocalcin and Cbfa1 was upregulated and the formation of mineralized bone nodules was significantly increased by osterix transfection. In combination with dexamethasone, bone nodule formation was further increased in osterix-transfected cells. Expression of both Sox-9 and PPAR-gamma, genes that are associated with chondrocyte and adipocyte differentiation, was initially increased in the osterix-transfected cells but was downregulated after day 7. This suggests that the process of osterix-induced differentiation of ES cells involves transition through an intermediate bi- or tripotential progenitor cell population. In conclusion, this cell differentiation strategy is useful not only for generating osteoblastic cells from ES cells, but also for investigating factors that influence this process and potentially delineating the ontogeny of the osteoblast.