Osteoblasts and chondroblasts are derived from common mesenchymal progenitors. Although bone morphogenetic protein induces mesenchymal differentiation into both osteogenic and chodrogenic lineage cells in vitro, its inhibitor, Noggin, is expressed exclusively during chondrogenic but not osteogenic differentiation in an embryonal carcinoma-derived mesodermal cell line, C1. We hypothesized that Noggin may regulate cell differentiation in a lineage-specific manner. To test this hypothesis, Noggin was overexpressed using recombinant adenovirus (Ad/Noggin) in mesodermal C1 cells to examine whether Noggin specifically inhibits chondrogenic differentiation. Noggin overexpression by recombinant adenovirus infection reduced Sox9, patched, Ihh, and type II, X, and XI collagen mRNA expression levels in C1 cell aggregates that were induced to differentiate into chondrocyte lineage by culturing in differentiation medium. In contrast, Noggin overexpression did not affect osteogenic differentiation in C1 cells because osteoblast phenotypic markers such as osteocalcin and alkaline phosphatase mRNA levels were not altered. We further examined whether Noggin also differentially affects chondrogenesis and osteogenesis in limb development by using organ cultures of long bone. Ad/Noggin infection into 15.5 d post conception limb skeletal rudiments that were cultured on filter membrane in vitro or on the chorioallantoic membranes in ovo inhibited the levels of chondrogenesis, which were evaluated based on alcian blue staining. These results suggest that Noggin specifically blocks chondrogenic differentiation, rather than osteogenic differentiation, in mesodermal stem cell line C1 and skeletal cells.