Osteoblasts and chondrocytes arise from common osteo-chondroprogenitor cells. We show here that inactivation of ERK1 and ERK2 in osteo-chondroprogenitor cells causes a block in osteoblast differentiation and leads to ectopic chondrogenic differentiation in the bone-forming region in the perichondrium. Furthermore, increased mitogen-activated protein kinase signaling in mesenchymal cells enhances osteoblast differentiation and inhibits chondrocyte differentiation. These observations indicate that extracellular signal-regulated kinase 1 (ERK1) and ERK2 play essential roles in the lineage specification of mesenchymal cells. The inactivation of ERK1 and ERK2 resulted in reduced beta-catenin expression, suggesting a role for canonical Wnt signaling in ERK1 and ERK2 regulation of skeletal lineage specification. Furthermore, inactivation of ERK1 and ERK2 significantly reduced RANKL expression, accounting for a delay in osteoclast formation. Thus, our results indicate that ERK1 and ERK2 not only play essential roles in the lineage specification of osteo-chondroprogenitor cells but also support osteoclast formation in vivo.