The effects of BMP2 on bone marrow stromal cell differentiation and bone formation after bone marrow ablation were determined using C57 BL/6J (B6) mice. Inhibition of BMP2 expression with lentiviral BMP2 shRNA prevented both mineralized nodule formation in vitro and bone formation in vivo, and blocked the expression of Runx2 and osterix, transcriptional determinants of terminal osteogenic differentiation. No effect was observed on the expression of Sox9, a transcription factor, which is the one of the first transcriptional determinant to be expressed in committed chondroprogenitor and osteoprogenitor cells. In vitro studies showed that exogenously added BMP7 rescued the expression of osterix and enhanced the expression of Sox9, but had no effect on the expression of Runx2, while it only partially recovered the development of mineral deposition in the cultures. On the other hand, the exogenous addition of BMP2 rescued both Runx2 and osterix expression, did not enhance the expression of Sox9, but fully recovered the inhibition of mineral deposition in the cultures. Using antibodies against CD146 and Sox9, immunohistological examination of the cell populations found in the medullary space three days after bone marrow ablation, showed qualitatively equal numbers of cells expressing these skeletal progenitor and stem cell markers in control and BMP2 shRNA treated animals. Fluorescence Activated Cell Sorting (FACS) analysis of the cells found with the marrow cavities at three days after marrow ablation using CD146 antibody showed near equal numbers of immunopositive cells in both control and shRNA treated animals. In summary, the differences observed in vitro for BMP2 and BMP7 on osteogenic gene expression and mineralization suggest that they have differing effects on bone cell differentiation. These results further demonstrate that in vivo BMP2 is a central morphogenetic regulator of post natal osteoprogenitor differentiation, but does not affect recruitment of progenitors to the osteoblastic lineage.