Cellular signaling via epidermal growth factor (EGF) and EGF-like ligands can determine cell fate and behavior. Osteoblasts, which are responsible for forming and mineralizing osteoid, express EGF receptors and alter rates of proliferation and differentiation in response to EGF receptor activation. Transgenic mice over-expressing the EGF-like ligand betacellulin (BTC) exhibit increased cortical bone deposition; however, because the transgene is ubiquitously expressed in these mice, the identity of cells affected by BTC and responsible for increased cortical bone thickness remains unknown. We have therefore examined the influence of BTC upon mesenchymal stem cell (MSC) and pre-osteoblast differentiation and proliferation. BTC decreases the expression of osteogenic markers in both MSCs and pre-osteoblasts; interestingly, increases in proliferation require hypoxia-inducible factor-alpha (HIF-alpha), as an HIF antagonist prevents BTC-driven proliferation. Both MSCs and pre-osteoblasts express EGF receptors ErbB1, ErbB2, and ErbB3, with no change in expression under osteogenic differentiation. These are the first data that demonstrate an influence of BTC upon MSCs and the first to implicate HIF-alpha in BTC-mediated proliferation.