The skeleton in vertebrates is composed of bone and cartilage, which contains three specific types: osteoblasts and osteoclasts in bone and chondrocytes in cartilage. Like other cell types in the body, skeletal cell differentiation is controlled by multiple transcription factors at various stages of their development. Cbfa1 and Osx, a newly identified zinc-finger containing protein, are osteoblast-specific transcription factors. Loss of function of either one of them leads to absence of bone in mammals. Here, we discuss transcription factors involved in controlling the differentiation of osteoclasts, such as Pu.1 and nuclear factor (NF)-kappaB, and chondrocytes, such as Sox proteins. Finally, recent progress in identifying mutations in transcription factors affecting skeletal patterning and development is also described.