Fraxetin (7,8-dihydroxy-6-methoxy coumarin), a coumarin derivative, was investigated for its effects on differentiation of osteoblasts. By means of alkaline phosphatase (ALP) activity and osteocalcin ELISA assay, we have shown that fraxetin exhibits a significant induction of differentiation in two human osteoblast-like cell lines, MG-63 and hFOB. Alkaline phosphatase and osteocalcin are phenotypic markers for early-stage differentiated osteoblasts and terminally differentiated osteoblasts, respectively. Our results indicated that fraxetin stimulated osteoblast differentiation at various stages (from osteoprogenitors to terminally differentiated osteoblasts). Induction of differentiation by fraxetin was associated with increased bone morphogenetic protein-2 (BMP-2) and BMP-4 productions. Addition of purified BMP-2 and BMP-4 proteins did not increase the upregulation of ALP activity and osteocalcin secretion by fraxetin, whereas the BMPs antagonist noggin blocked both fraxetin and BMP-2 and BMP-4 mediated ALP activity and osteocalcin secretion enhancement, indicating that BMP-2 and BMP-4 productions are required in fraxetin-mediated osteoblast maturation and differentiation. These findings are novel and may be important in the treatment and prevention of osteoporosis.