Although retinoic acid (RA) is a potent agent that coordinates inhibition of proliferation with differentiation of many cell types, RA-mediated signaling pathways in osteosarcoma cell differentiation are uncharacterized. In this study, we show that in human U2OS osteosarcoma cells, decreased phosphorylation of RA receptor alpha (RARalpha) by RA treatment or overexpressing a phosphorylation-defective mutant RARalphaS77A results in the inhibition of proliferation and induction of differentiation, and that U2OS cells transduced with RARalphaS77A suppresses tumor formation in nude mice. Moreover, using different human primary osteosarcoma cells and human mesenchymal stem cells for gene expression analysis, we found that either RA or RARalphaS77A induces many of the same differentiation response pathways and signaling molecules involved in U2OS cell differentiation. In addition, overexpression of the fibroblast growth factor 8f (FGF8f), one of the downstream targets induced by both RA and RARalphaS77A in U2OS cells, inhibits proliferation and induces expression of osteoblastic differentiation regulators. Hence, these data strongly suggest that RA-suppressed phosphorylation of RARalpha induces FGF8f expression to mediate differentiation response pathway in U2OS osteosarcoma cells.