Hedgehog and canonical Wnt/beta-catenin signaling are implicated in development of the osteoblast, the bone matrix-secreting cell of the vertebrate skeleton. We have used genetic approaches to dissect the roles of these pathways in specification of the osteoblast lineage. Previous studies indicate that Ihh signaling in the long bones is essential for initial specification of an osteoblast progenitor to a Runx2+ osteoblast precursor. We show here that this is a transient requirement, as removal of Hh responsiveness in later Runx2+, Osx1+ osteoblast precursors does not disrupt the formation of mature osteoblasts. By contrast, the removal of canonical Wnt signaling by conditional removal of the beta-catenin gene in early osteoblast progenitors or in Runx2+, Osx1+ osteoblast precursors results in a similar phenotype: osteoblasts fail to progress to a terminal osteocalcin+ fate and instead convert to a chondrocyte fate. By contrast, stabilization of beta-catenin signaling in Runx2+, Osx1+ osteoblast precursors leads to the premature differentiation of bone matrix secreting osteoblasts. These data demonstrate that commitment within the osteoblast lineage requires sequential, stage-specific, Ihh and canonical Wnt/beta-catenin signaling to promote osteogenic, and block chondrogenic, programs of cell fate specification.