Osteoblasts and chondrocytes arise from common bipotential mesenchymal progenitor cells. Although the differentiation of these two cell lineages can be induced by treatment with bone morphogenetic proteins (BMPs), the responses of mesenchymal progenitors to BMP differ from cell line to cell line. Here we demonstrate that C3H/10T1/2 cells preferred chondrogenic differentiation, primary bone marrow stroma cells (MSCs) tended to convert to osteoblasts, and ST-2 cells differentiated into both the osteoblastic and chondrocytic lineages simultaneously, suggesting that a molecular switch functions to select cell fate. Osterix, the secondary master regulator of osteoblastogenesis, was induced by BMP at high and low levels in MSCs and ST-2 cells, respectively; in contrast, C3H/10T1/2 cells demonstrated only faint expression. As osterix has been suggested as a negative regulator of chondrogenesis, we hypothesized that the intense chondrocyte differentiation of C3H/10T1/2 cells may have resulted from an absence of osterix. We therefore restored osterix gene expression in C3H/10T1/2 cells using an adenovirus vector. Following BMP treatment, infection with an osterix-encoding virus dramatically inhibited the chondrocytic differentiation of C3H/10T1/2 cells, resulting instead in prominent osteoblast differentiation. These results indicate the chondrogenic potential of C3H/10T1/2 cells was abrogated by osterix expression. Chondrocyte differentiation of MSCs, however, was not enhanced by silencing the osterix gene using lentivirus-mediated shRNA, despite successful suppression of osteoblast differentiation. These results suggest that the low levels of osterix expression remaining after knockdown are sufficient to block chondrogenesis, whereas higher expression may be required to promote osteoblastic differentiation.