We investigated the expression and regulation of the zinc finger protein Osterix (Osx) during endochondral ossification in mice. In studies to determine the temporal and spatial regulation of Osx mRNA and protein during embryogenesis we found it to be present throughout development, but its expression is restricted to the immature chondro/osteoprogenitor cells and mature osteoblasts, excluding hypertrophic chondrocytes. Using a fracture model, we show a consistent pattern of Osx protein expression in mesenchymal progenitor cells in the periosteum and immature chondrocytes and osteoblasts embedded in the fracture callus. In contrast, hypertrophic chondrocytes, vessels and fibrous tissue were devoid of Osx expression. Additionally, using RNA isolated from fracture callus throughout the healing process, we observe that Osx transcripts parallel that of Runx2 and differentially overlap both cartilage and bone phenotypic markers. Furthermore, using limb bud-derived MLB13MYC Clone 17 cells, we show that PTHrP inhibited chondrocyte maturation while it enhanced mRNA levels of Osx in these chondro/osteoprogenitor cells. Gain and loss of function of Osx function experiments with these cells demonstrated that Osx serves as an inhibitor of chondrogenesis and chondrocyte maturation, while it promotes osteoblast maturation. Together, our findings provide the first demonstration of the molecular mechanisms underlying Osx inhibition of chondrocyte differentiation, and further suggest a role for this transcription factor in mediating endochondral ossification during bone repair.