Core-binding factor beta (CBFbeta, also called polyomavirus enhancer binding protein 2beta (PEBP2B)) is associated with an inversion of chromosome 16 and is associated with acute myeloid leukemia in humans. CBFbeta forms a heterodimer with RUNX1 (runt-related transcription factor 1), which has a DNA binding domain homologous to the pair-rule protein runt in Drosophila melanogaster. Both RUNX1 and CBFbeta are essential for hematopoiesis. Haploinsufficiency of another runt-related protein, RUNX2 (also called CBFA1), causes cleidocranial dysplasia in humans and is essential in skeletal development by regulating osteoblast differentiation and chondrocyte maturation. Mice deficient in Cbfb (Cbfb(-/-)) die at midgestation, so the function of Cbfbeta in skeletal development has yet to be ascertained. To investigate this issue, we rescued hematopoiesis of Cbfb(-/-) mice by introducing Cbfb using the Gata1 promoter. The rescued Cbfb(-/-) mice recapitulated fetal liver hematopoiesis in erythroid and megakaryocytic lineages and survived until birth, but showed severely delayed bone formation. Although mesenchymal cells differentiated into immature osteoblasts, intramembranous bones were poorly formed. The maturation of chondrocytes into hypertrophic cells was markedly delayed, and no endochondral bones were formed. Electrophoretic mobility shift assays and reporter assays showed that Cbfbeta was necessary for the efficient DNA binding of Runx2 and for Runx2-dependent transcriptional activation. These findings indicate that Cbfbeta is required for the function of Runx2 in skeletal development.