Mfh1/Foxc2 is a member of forkhead/winged helix transcription factor family in which its members serve as key regulators in embryogenesis and cell differentiation in various species. Mutant mice null for Mfh1 show defects in axial and cranial skeletogenesis, suggesting requirement of Mfh1 for skeletal tissue development. However, the roles of Mfh1 and its regulation during early skeletogenesis have not been understood fully yet. In this study, we investigated developmental regulation of Mfh1 expression during embryonic skeletogenesis in vivo and in vitro chondrogenic cell differentiation using a mesodermal progenitor-like cell line C1. We first examined expression patterns of Mfh1 in relation to the cartilage phenotype-related molecules including bone morphogenetic proteins (BMPs) during mouse embryogenesis by in situ hybridization. In 10.5 days postcoitum (dpc) mouse limb, Mfh1 messenger RNA (mRNA) was expressed in the mesenchymal cells in the tissues that later give rise to skeleton. In 11.5 dpc embryos, Mfh1 transcripts were expressed in the cell condensation of skeletal blastemas. BMP2 transcripts were expressed in the cell condensation proximal to the Mfh1-expressing cells in the limbs and those of BMP-7 were expressed in the mesenchymal tissue surrounding the Mfh1-positive cell condensation. In 12.5 dpc and 13.5 dpc embryos, the expression of Mfh1 was localized to the perichondrium, which surrounds cells that express noggin and SOX9 mRNA. BMP-2 expression was overlapped with that of Mfh1 in the peripheral layer of 12.5 dpc and 13.5 dpc limb skeletal blastemas. Mfh1 expression persisted in the perichondrium of 15.5 dpc embryos though its level was reduced. We then examined the expression of Mfh1 in the mouse mesodermal cell line C1 that differentiates into chondrocytes in vitro. Mfh1 mRNA was expressed constitutively at low levels in C1 cells before the induction of its differentiation. On the differentiation of C1 cells into chondrocytes by the treatment with dexamethasone (Dex), Mfh1 expression was increased and peaked on day 4 of Dex treatment. Treatment with BMP-4/7 and BMP-7 protein also enhanced Mfh1 expression in C1 cells. To further examine the causative relationship between BMP and Mfh1 in mesenchymal tissue, we performed a mouse limb bud organ culture to implant BMP proteins with carriers into the mesenchymal tissue of the limb bud. Implantation of BMP-7 protein in the limb bud of 11.5 dpc embryos induced Mfh1 expression, suggesting that BMP regulates Mfh1 expression in limb mesenchyme. These results indicate that Mfh1 expression is associated with the early stage of chondrogenic differentiation both in vivo and in vitro and that BMPs regulate Mfh1 expression in skeletal precursor cells.