BACKGROUND: Better understanding of the signaling pathways that regulate human bone marrow stromal stem cell (hBMSC) differentiation into bone-forming osteoblasts is crucial for their clinical use in regenerative medicine. Chemical biology approaches using small molecules targeting specific signaling pathways are increasingly employed to manipulate stem cell differentiation fate. METHODS: We employed alkaline phosphatase activity and staining assays to assess osteoblast differentiation and Alizarin R staining to assess mineralized matrix formation of cultured hBMSCs. Changes in gene expression were assessed using an Agilent microarray platform, and data normalization and bioinformatics were performed using GeneSpring software. For in vivo ectopic bone formation experiments, hMSCs were mixed with hydroxyapatite-tricalcium phosphate granules and implanted subcutaneously into the dorsal surface of 8-week-old female nude mice. Hematoxylin and eosin staining and Sirius Red staining were used to detect bone formation in vivo. RESULTS: We identified several compounds which inhibited osteoblastic differentiation of hMSCs. In particular, we identified ruxolitinib (INCB018424) (3 μM), an inhibitor of JAK-STAT signaling that inhibited osteoblastic differentiation and matrix mineralization of hMSCs in vitro and reduced ectopic bone formation in vivo. Global gene expression profiling of ruxolitinib-treated cells identified 847 upregulated and 822 downregulated mRNA transcripts, compared to vehicle-treated control cells. Bioinformatic analysis revealed differential regulation of multiple genetic pathways, including TGFβ and insulin signaling, endochondral ossification, and focal adhesion. CONCLUSIONS: We identified ruxolitinib as an important regulator of osteoblast differentiation of hMSCs. It is plausible that inhibition of osteoblast differentiation by ruxolitinib may represent a novel therapeutic strategy for the treatment of pathological conditions caused by accelerated osteoblast differentiation and mineralization.