In addition to changes in cellular pathways, loss of differentiation is a notable feature of osteosarcoma. We hypothesized that blocks to normal differentiation may be a common feature of osteosarcoma, and may be one of many critical events that occur during oncogenesis in osteosarcoma. Furthermore, therapies that restore normal programs of differentiation may be attractive new treatment strategies for chemo-therapy and/or chemoprevention. We exposed an osteosarcoma cell line to two highly osteogenic bone morphogenetic proteins and noted increased tumor volume and no evidence of osteoinduction in vivo. We then used expression profile analysis to identify downstream targets of the osteogenic bone morphogenetic proteins, revealing up-regulation of the inhibitor of differentiation genes 1, 2, and 3, and the nuclear receptor, peroxisome proliferator activated receptor gamma. We then evaluated the use of nuclear receptor agonists, including peroxisome proliferator activated receptor gamma, to circumvent the apparent block to bone morphogenetic protein-induced differentiation in osteosarcoma cell lines. The peroxisome proliferator activated receptor gamma/retinoid X receptor agonists induced terminal differentiation in all four osteosarcoma cell lines and were synergistic when combined. In osteosarcoma cells, there are inherent blocks to normal bone morphogenetic protein-induced differentiation; however, they do not prevent nuclear receptor agonists from inducing terminal differentiation.