Bone formation is a continuous process that begins during fetal development and persists throughout life as a remodeling process. In the event of injury, bones heal by generating new bone rather than scar tissue; thus, it can accurately be described as a regenerative process. To elucidate the extent to which fetal skeletal development and skeletal regeneration are similar, we performed a series of detailed expression analyses using a number of genes that regulate key stages of endochondral ossification. They included genes in the indian hedgehog (ihh) and core binding factor 1 (cbfa1) pathways, and genes associated with extracellular matrix remodeling and vascular invasion including vascular endothelial growth factor (VEGF) and matrix metalloproteinase 13 (mmp13). Our analyses suggested that even at the earliest stages of mesenchymal cell condensation, chondrocyte (ihh, cbfa1 and collagen type II-positive) and perichondrial (gli1 and osteocalcin-positive) cell populations were already specified. As chondrocytes matured, they continued to express cbfa1 and ihh whereas cbfa1, osteocalcin and gli1 persisted in presumptive periosteal cells. Later, VEGF and mmp13 transcripts were abundant in chondrocytes as they underwent hypertrophy and terminal differentiation. Based on these expression patterns and available genetic data, we propose a model where Ihh and Cbfa1, together with Gli1 and Osteocalcin participate in establishing reciprocal signal site of injury. The persistence of cbfa1 and ihh, and their targets osteocalcin and gli1, in the callus suggests comparable processes of chondrocyte maturation and specification of a neo-perichondrium occur following injury. VEGF and mmp13 are expressed during the later stages of healing, coincident with the onset of vascularization of the callus and subsequent ossification. Taken together, these data suggest the genetic mechanisms regulating fetal skeletogenesis also regulate adult skeletal regeneration, and point to important regulators of angiogenesis and ossification in bone regeneration.