Mesenchymal stem cell commitment to an osteoprogenitor lineage requires the activity of Runx2, a molecule implicated in the etiopathology of multiple congenital craniofacial anomalies. Through promoter analyses, we have recently identified a new direct transcriptional target of Runx2, Nell‐1, a craniosynostosis (CS)–associated molecule with potent osteogenic properties. This study investigated the mechanistic and functional relationship between Nell‐1 and Runx2 in regulating osteoblast differentiation. The results showed that spatiotemporal distribution and expression levels of Nell‐1 correlated closely with those of endogenous Runx2 during craniofacial development. Phenotypically, cross‐mating Nell‐1 overexpression transgenic (CMV‐Nell‐1) mice with Runx2 haploinsufficient (Runx2^+/−) mice partially rescued the calvarial defects in the cleidocranial dysplasia (CCD)–like phenotype of Runx2^+/− mice, whereas Nell‐1 protein induced mineralization and bone formation in Runx2^+/− but not Runx2^−/− calvarial explants. Runx2‐mediated osteoblastic gene expression and/or mineralization was severely reduced by Nell‐1 siRNA oligos transfection into Runx2^+/+ newborn mouse calvarial cells (NMCCs) or in N‐ethyl‐N‐nitrosourea (ENU)–induced Nell‐1^−/− NMCCs. Meanwhile, Nell‐1 overexpression partially rescued osteoblastic gene expression but not mineralization in Runx2 null (Runx2^−/−) NMCCs. Mechanistically, irrespective of Runx2 genotype, Nell‐1 signaling activates ERK1/2 and JNK1 mitogen‐activated protein kinase (MAPK) pathways in NMCCs and enhances Runx2 phosphorylation and activity when Runx2 is present. Collectively, these data demonstrate that Nell‐1 is a critical downstream Runx2 functional mediator insofar as Runx2‐regulated Nell‐1 promotes osteoblastic differentiation through, in part, activation of MAPK and enhanced phosphorylation of Runx2, and Runx2 activity is significantly reduced when Nell‐1 is blocked or absent. © 2011 American Society for Bone and Mineral Research.