Efficient osteogenic differentiation and bone formation from mesenchymal stem cells (MSCs) should have clinical applications in treating nonunion fracture healing. MSCs are adherent bone marrow stromal cells that can self-renew and differentiate into osteogenic, chondrogenic, adipogenic, and myogenic lineages. We have identified bone morphogenetic protein 9 (BMP-9) as one of the most osteogenic BMPs. Here we investigate the effect of insulin-like growth factor 2 (IGF-2) on BMP-9-induced bone formation. We have found that endogenous IGF-2 expression is low in MSCs. Expression of IGF-2 can potentiate BMP-9-induced early osteogenic marker alkaline phosphatase (ALP) activity and the expression of later markers. IGF-2 has been shown to augment BMP-9-induced ectopic bone formation in the stem cell implantation assay. In perinatal limb explant culture assay, IGF-2 enhances BMP-9-induced endochondral ossification, whereas IGF-2 itself can promote the expansion of the hypertropic chondrocyte zone of the cultured limb explants. Expression of the IGF antagonists IGFBP3 and IGFBP4 leads to inhibition of the IGF-2 effect on BMP-9-induced ALP activity and matrix mineralization. Mechanistically, IGF-2 is further shown to enhance the BMP-9-induced BMPR-Smad reporter activity and Smad1/5/8 nuclear translocation. PI3-kinase (PI3K) inhibitor LY294002 abolishes the IGF-2 potentiation effect on BMP-9-mediated osteogenic signaling and can directly inhibit BMP-9 activity. These results demonstrate that BMP-9 crosstalks with IGF-2 through PI3K/AKT signaling pathway during osteogenic differentiation of MSCs. Taken together, our findings suggest that a combination of BMP-9 and IGF-2 may be explored as an effective bone-regeneration agent to treat large segmental bony defects, nonunion fracture, and/or osteoporotic fracture. © 2010 American Society for Bone and Mineral Research.