Commitment of Runx2-expressing precursor osteoblasts to functional osteoblasts and then to osteocytes is triggered by Osterix (Osx), which activates its target genes in those cells during bone formation. It is not yet known whether Osx has a role in remodeling the chromatin architecture of its target genes during the transition from preosteoblast to osteoblast. In testing the hypothesis that Osx is indispensable for active chromatin architecture, we first showed that in Osx-null calvarial cells occupancy of the transcriptional activators, including lysine 4 methyl transferase (Wdr5), c-Myc, and H2A.Z, at the Osx target gene Bsp was very markedly decreased. The levels of methylation of lysines 4 and 36 and acetylation of histone H3, markers for active chromatin, were also reduced at the Bsp gene in these cells. In contrast, occupancy of the transcriptional repressors HP1 and the nucleolar protein 66 (NO66), a histone demethylase previously identified as an Osx-interacting protein, was increased at the Bsp gene in Osx-null calvarial cells. Furthermore, the Bsp promoter was hypermethylated in embryonic stem (ES) cells and in embryonic day 9.5 (E9.5) embryos but was markedly hypomethylated in the calvaria of E18.5 embryos, coinciding with robust Bsp expression. In contrast, CpG methylation in the Bsp promoter remained high in Osx-null calvaria compared to Osx–wild-type calvaria. Our data also revealed that NO66 interacted with DNA Methyltransferase 1A (DNMT1A), histone deacetylase 1A (HDAC1A), and HP1, which are known to control histone and DNA methylation. In addition, HP1 stimulated the demethylase activity of NO66 for its substrates “trimethylation of histone H3 at lysine 4” (H3K4me3) and “trimethylation of histone H3 at lysine 36” (H3K36me3). Our findings strongly suggest that in the absence of Osx, the chromatin of Osx target genes is transcriptionally inactive. We propose that Osx is a molecular switch for the formation of an active chromatin state during osteoblast differentiation, whereas NO66 helps gene repression through histone demethylation and/or formation of a repressor complex, resulting in multilayered control of the chromatin architecture of specific osteoblast genes. © 2014 American Society for Bone and Mineral Research.