Skeletogenesis depends on the activity of bone-forming cells derived from mesenchymal cells. The pathways that control mesenchymal cell differentiation are not well understood. We propose that Foxo1 is an early molecular regulator during mesenchymal cell differentiation into osteoblasts. In mouse embryos, Foxo1 expression is higher in skeletal tissues, while Foxo1 silencing has a drastic impact on skeletogenesis and craniofacial development, specially affecting pre-maxilla, nasal bone, mandible, tibia, and clavicle. Similarly, Foxo1 activity and expression increase in mouse mesenchymal cells under the influence of osteogenic stimulants. In addition, silencing Foxo1 blocks the expression of osteogenic markers such as Runx2, alkaline phosphatase, and osteocalcin and results in decreased culture calcification even in the presence of strong osteogenic stimulants. Conversely, the expression of these markers increases significantly in response to Foxo1 overexpression. One mechanism through which Foxo1 affects mesenchymal cell differentiation into osteoblasts is through regulation of a key osteogenic transcription factor, Runx2. Indeed, our results show that Foxo1 directly interacts with the promoter of Runx2 and regulates its expression. Using a tibia organ culture model, we confirmed that silencing Foxo1 decreases the expression of Runx2 and impairs bone formation. Furthermore, our data reveals that Runx2 and Foxo1 interact with each other and cooperate in the transcriptional regulation of osteoblast markers. In conclusion, our in vitro, ex vivo, and in vivo results strongly support the notion that Foxo1 is an early molecular regulator in the differentiation of mesenchymal cells into osteoblast.