Loss of function mutations in FGD1 result in faciogenital dysplasia, an X-linked human developmental disorder that adversely affects the formation of multiple skeletal structures. FGD1 encodes a guanine nucleotide exchange factor that specifically activates Cdc42, a Rho family small GTPase that regulates a variety of cellular behaviors. We have found that FGD1 is expressed in human mesenchymal stem cells (hMSCs) isolated from adult bone marrow. hMSCs are multipotent cells that can differentiate into many cell types, including fibroblasts, osteoblasts, adipocytes, and chondrocytes, and are thought to play a role in maintaining musculoskeletal tissues throughout life. We demonstrate an active role of FGD1 in osteogenic differentiation of hMSCs. During osteogenic differentiation of hMSCs in culture, we observed up-regulation of both FGD1 expression and Cdc42 activity. Activating FGD1/Cdc42 signaling by overexpression of either FGD1 or constitutively active Cdc42 promoted hMSC osteogenesis, while inhibiting Cdc42 signaling by either dominant negative mutants of FGD1 or Cdc42 suppressed osteogenesis. These results demonstrate an important role for FGD1/Cdc42 signaling in hMSC osteogenesis and suggest that the defects in bone remodeling in faciogenital dysplasia may persist throughout adult life and serve as a potential pathway that may be targeted for enhancing bone regeneration.