Osteoblasts, normally derived from undifferentiated mesenchymal precursor cells, acquire their characteristic phenotypes when induced by various regulatory factors, one of which is bone morphogenetic protein-2 (BMP-2). Our recent studies suggest that expression of cAMP-dependent protein kinase (PKA) inhibitor G (PKIG) is down-regulated as human mesenchymal stromal cells (MSCs) undergo BMP-2-induced osteoblastic differentiation. This raises our hypothesis that the PKA pathway is involved in osteogenesis. In this report, we demonstrated that PKIG in human MSCs and its murine homologue PKA inhibitor gamma (PKIgamma) in murine pre-myoblast C2C12 cells were down-regulated when these cells were treated with BMP-2. On the contrary, the PKA activity of C2C12 cells was increased upon BMP-2 treatment. Overexpression of PKIgamma in C2C12 cells was shown to repress mRNA expression of early osteoblastic markers osterix and type I collagen while inhibiting the PKA activity. This correlated with decreased alkaline phosphatase (ALP) activities. Furthermore, inhibition of the PKA activity using its specific inhibitor KT5720 was found to have the similar effect, whereas 8-Br-cAMP, a specific PKA activator, accelerated BMP-2-induced ALP activities. Finally, this study showed that BMP-2 treatment promoted activities of transcription regulatory elements including cAMP response element (CRE) and activating protein-1 (AP1). This effect of BMP-2 was diminished in PKIgamma-overexpressed C2C12 cells. Taken together, our results indicate that the activation of the PKA pathway may be one of key BMP-2-activated signaling events that lead to osteogenesis and that downregulation of PKIgamma may be prerequisite for the PKA activation during the osteoblastic differentiation of precursor cells.