The vertebral column is a defined feature of vertebrates. In birds and mammals, the sclerotome yields cartilaginous material for the vertebral column. In teleosts, however, it remains uncertain whether the sclerotome participates in vertebral column formation. To investigate osteoblast development in the teleost, we established transgenic systems that allow in vivo observation of osteoblasts and their progenitors marked by fluorescence of DsRed and enhanced green fluorescent protein (EGFP), respectively. In twist-EGFP transgenic medaka, EGFP-positive cells first appeared in the ventromedial portion of respective somites corresponding to the sclerotome, migrated dorsally around the notochord, and concentrated in the intervertebral regions. Ultrastructural analysis of the intervertebral regions revealed that some of these cells were directly located on the osteoidal surface of the perichordal centrum, and enriched with rough endoplasmic reticulum in their cytoplasm. By using the double transgenic medaka of twist-EGFP and osteocalcin-DsRed, we clarified that the EGFP-positive cells in the intervertebral region differentiated into mature osteoblasts expressing the DsRed. In vivo bone labeling in fact confirmed active matrix formation and mineralization of the perichordal centrum exclusively in the intervertebral region of zebrafish larvae as well as medaka larvae. These findings strongly suggest that the teleost intervertebral region acts as a growth center of the perichordal centrum, where the sclerotome-derived cells differentiate into osteoblasts. Developmental Dynamics 236:3031–3046, 2007. © 2007 Wiley-Liss, Inc.