Recent advances have been made in the cellular and molecular mechanisms involved in monostotic and polyostotic fibrous dysplasia, a rare nonmalignant disease causing bone deformations and fractures. The molecular basis of fibrous dysplasia has been clarified when mutations affecting the stimulatory alpha subunit of G protein (Gs) have been found in dysplastic bone lesions. The histological analysis of dysplastic lesions revealed that the mutations in Gsalpha caused abnormalities in cells of the osteoblastic lineage and therefore in the bone matrix. Further in vitro analyses of bone cells from mutant dysplastic bone lesions revealed that the abnormal deposition of immature bone matrix in fibrous dysplasia results from decreased differentiation and increased proliferation of osteoblastic cells. Finally, the signaling pathway involved in these osteoblastic abnormalities has been identified. It is now apparent that the constitutive elevation in cAMP level induced by the Gsalpha mutations leads to alterations in the expression of several target genes whose promoters contain cAMP-responsive elements, such as c-fos, c-jun, Il-6 and Il-11. This in turn affects the transcription and expression of downstream genes and results in the alterations of osteoblast recruitment and function in dysplastic bone lesions. These mechanisms provide a cellular and molecular basis for the alterations in bone cells and bone matrix in fibrous dysplasia.