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Skeletal regeneration is accomplished by a cascade of biologic processes that may include differentiation of pluripotential tissue, endochondral ossification, and bone remodeling. It has been shown that all these processes are influenced strongly by the local tissue mechanical loading history. This article reviews some of the mechanobiologic principles that are thought to guide the differentiation of mesenchymal tissue into bone, cartilage, or fibrous tissue during the initial phase of regeneration. Cyclic motion and the associated shear stresses cause cell proliferation and the production of a large callus in the early phases of fracture healing. For intermittently imposed loading in the regenerating tissue: (1) direct intramembranous bone formation is permitted in areas of low stress and strain; (2) low to moderate magnitudes of tensile strain and hydrostatic tensile stress may stimulate intramembranous ossification; (3) poor vascularity can promote chondrogenesis in an otherwise osteogenic environment; (4) hydrostatic compressive stress is a stimulus for chondrogenesis; (5) high tensile strain is a stimulus for the net production of fibrous tissue; and (6) tensile strain with a superimposed hydrostatic compressive stress will stimulate the development of fibrocartilage. Finite element models are used to show that the patterns of tissue differentiation observed in fracture healing and distraction osteogenesis can be predicted from these fundamental mechanobiologic concepts. In areas of cartilage formation, subsequent endochondral ossification normally will proceed, but it can be inhibited by intermittent hydrostatic compressive stress and accelerated by octahedral shear stress (or strain). Later, bone remodeling at these sites can be expected to follow the same mechanobiologic adaptation rules as normal bone.