It has been well established that core binding factor a-1/osteoblast-specific factor-2 (cbfa1/osf2) is a key regulator of osteoblast differentiation and function, however, it is not known whether it can induce bone formation in vitro and in vivo. To investigate the effect of cbfa1/osf2 on bone formation, we used a recombinant adenoviral vector carrying the mouse cbfa1/osf2 gene to transduce primary cultured bone marrow stromal cells (MSCs) of BALB/c mice. We found that Ad-cbfa1/osf2-transduced MSCs produced cbfa1/osf2 protein and differentiated into osteoblast-like cells. The transduced MSCs had increased alkaline phosphatase activity, increased expression of osteocalcin, osteopontin and bone sialoprotein, and increased matrix mineralization in vitro. To observe the induction of bone formation in vivo, MSCs transduced with Ad-cbfa1/osf2 were transplanted into a 5 mm diameter critical-sized skull defect in BALB/c mice, with type I collagen as scaffolding material. Healing of the defect in treatment and control groups was examined grossly and histologically at four weeks. Skull defects transplanted with Ad-cbfa1/osf2-transduced MSCs had an average of 85% osseous closure at four weeks. Control groups in which the defects were not treated (group 1), treated with collagen only (group 2), or treated with collagen and nontransduced MSCs (group 3) showed little or no osseous healing. These studies indicate that cbfa1/osf2 can induce osteoblast differentiation and bone formation both in vitro and in vivo, suggesting that MSCs transduced with the cbfa1/osf2 gene may be useful in treating bone defects.