Bone morphogenetic protein (BMP)-2 strongly induces bone formation. Introduction of the protein in muscle tissue results in ectopic bone formation. Similarly, BMP-2 treatment also stimulates the in vitro transdifferentiation of myogenic cells to osteogenic cells. The establishment of an in vitro model system has enabled the investigation of intracellular events including BMP receptor activation, BMP-2-induced R-Smad activation, and kinase activation, and the role of osteogenic transcription factors, such as Runx2, Osx, Dlx5, and Msx2. Many reviews have addressed events downstream of BMP-receptor binding but few deal with molecular cascades involved in BMP-2-induced osteogenesis. We focus on critical molecular switches, especially transcription factors, and several kinase pathways involved in osteogenic differentiation.