p202, an interferon-inducible protein that belongs to an interferon-inducible p200 family, was highly induced in the course of osteogenesis of pluripotent C2C12 cells and the chondrogenesis of C3H10T1/2 cells. Differential expression of p202 is probably due, at least in part, to the transactivation of the p202 gene by Smad transcription factors. Overexpressing p202 inhibited, whereas lowering p202 via a siRNA approach enhanced, chondrocyte differentiation. In contrast, overexpression of p202 enhanced, whereas knockdown of p202 inhibited, osteoblast differentiation. Molecular mechanism studies revealed that p202 and parathyroid hormone-related peptide (PTHrP) formed a positive feedback loop, since (1) overexpressing p202 markedly enhanced whereas knocking down p202 suppressed the expression of PTHrP; and (2) p202 expression was increased in growth plate chondrocytes of PTHrP receptor transgenic mouse embryos; however, its expression was reduced in PTHrP knockout mouse embryos. Taken together, our findings demonstrate that p202 protein is a novel, important mediator of chondrogenic and osteogenic differentiation.