Heterotopic ossification is a pathologic condition in which bone tissue is formed outside of the skeleton, within soft tissues of the body. The extraskeletal bone that forms in these disorders is normal; the cellular mechanisms that direct cell fate decisions are dysregulated. Patients with fibrodysplasia ossificans progressiva (FOP), a rare human genetic disorder of extensive and progressive heterotopic ossification, have malformations of normal skeletal elements, identifying the causative gene mutation and its relevant signaling pathways as key regulators of skeletal development and of cell fate decisions by adult stem cells. The discovery that mildly activating mutations in ACVR1/ALK2, a bone morphogenetic protein (BMP) type I receptor, is the cause of FOP has provided opportunities to identify previously unknown functions for this receptor and for BMP signaling and to develop new diagnostic and therapeutic strategies for FOP and other more common forms of heterotopic ossification, as well as tissue engineering applications.