Cholesterol is an important molecule that plays a key role in regulating cellular differentiation and function. Although the possible role of lipids has been implicated in regulating osteoblastic cells, the role of cholesterol in that process is not well defined. In this study we have examined the role of the cellular cholesterol biosynthetic pathway on osteoblastic differentiation of marrow stromal cells (MSCs). Treatment of pluripotent mouse MSCs M2–10B4 with inhibitors of the cholesterol biosynthetic pathway mevastatin or mevinolin inhibited the maturation of these cells into functional osteoblastic cells. This was determined by the inhibition of the activity and expression of alkaline phosphatase (ALP), a key enzyme involved in differentiation and mineralization of osteoblastic cell cultures, as well as inhibition of mineralization. Mevastatin treatment did not affect expression of the osteoblast-specific gene osteocalcin (OCN). Furthermore, promoter-reporter studies in MSCs showed that mevastatin inhibited activity of the ALP gene promoter, suggesting regulation by derivatives of the cholesterol biosynthetic pathway. The effects of mevastatin and mevinolin were reversed by mevalonate but not by geranylgeraniol or farnesol, intermediates in the cholesterol biosynthetic pathway. Altogether, these results suggest that products of the cholesterol biosynthetic pathway are important for proper development of MSCs into functional osteoblastic cells capable of forming a mineralized matrix. Identification of those molecules may provide new therapeutic approaches to prevent the decline in osteoblastic activity in osteoporosis and aging.