During endochondral ossification, the cartilage is surrounded by a layer of cells that constitute the perichondrium. Communication between osteoblasts in the perichondrium via N-cadherin adherens junctions is essential for endochondral bone growth. We observed that adherens junction molecule N-cadherin and its interacting partners p120, β-catenin and PTEN are expressed by cells present in the perichondrium. To study if N-cadherin mediated adherens junctions play a role in mediating signal transduction events during bone development, we utilized MC3T3E1 preosteoblasts plated at sub confluent (low) and confluent (high) densities to mimic adherens junction formation. When MC3T3E1 cells were plated at high density we observed an increase in phosphorylation of AKTSer473 and its downstream target GSK3Ser9, which coincided with an increase in Osterix, Osteomodulin and Osteoglycin gene expression. Using immunofluorescence, we identified N-cadherin, p120 and β-catenin localized at the membrane of MC3T3E1 cells. Treatment of confluent MC3T3E1cells with an N-cadherin junction inhibitor-EGTA and a PI3K inhibitor LY294002 resulted in reduction of phosphorylation levels of AKT and GSK3 and expression of Osterix, Osteomodulin and Osteoglycin. Furthermore, utilizing an N-cadherin blocking antibody resulted in reduced AKT signaling and Osterix gene expression, suggesting that osteoblast junction formation is linked to activation of PI3K signaling, which leads to osteoblast differentiation. To further explore the strength of this linkage, we utilized a conditional knockout approach using Dermo1cre to delete β-catenin and PTEN, two important proteins known to be essential for adherens junctions and PI3K signaling, respectively. In the absence of β-catenin, we observed a decrease in adherens junctions and AKT signaling in the perichondrium. PTEN deletion, on the other hand, increased the number of cells expressing N-cadherin in the perichondrium. These observations show that N-cadherin mediated junctions between osteoblasts are needed for osteoblast gene transcription.