The potential of mesenchymal stem cells (MSC) to differentiate into functional bone forming cells provides an important tool for bone regeneration. The identification of factors capable of promoting osteoblast differentiation in MSCs is therefore critical to enhance the osteogenic potential of MSCs. Using microarray analysis combined with biochemical and molecular approach, we found that FGF18, a member of the FGF family, is upregulated during osteoblast differentiation induced by dexamethasone in murine MSCs. We showed that overexpression of FGF18 by lentiviral (LV) infection, or treatment of MSCs with recombinant human (rh)FGF18 increased the expression of the osteoblast specific transcription factor Runx2, and enhanced osteoblast phenotypic marker gene expression and in vitro osteogenesis. Molecular silencing using lentiviral shRNA demonstrated that downregulation of FGFR1 or FGFR2 abrogated osteoblast gene expression induced by either LV-FGF18 or rhFGF18, indicating that FGF18 enhances osteoblast differentiation in MSCs via activation of FGFR1 or FGFR2 signaling. Biochemical and pharmacological analyses showed that the induction of phenotypic osteoblast markers by LV-FGF18 is mediated by activation of ERK1/2-MAPKs and PI3K signaling in MSCs. These results reveal that FGF18 is an essential autocrine positive regulator of the osteogenic differentiation program in murine MSCs and indicate that osteogenic differentiation induced by FGF18 in MSCs is triggered by FGFR1/FGFR2-mediated ERK1/2-MAPKs and PI3K signaling.