Different from tetrapods, teleost vertebral centra form without prior establishment of a cartilaginous scaffold, in two steps: First, mineralization of the notochord sheath establishes the vertebral centra. Second, sclerotome derived mesenchymal cells migrate around the notochord sheath. These cells differentiate into osteoblasts and deposit bone onto the mineralized notochord sheath in a process of intramembranous bone formation. In contrast, most skeletal elements of the cranial skeleton arise by chondral bone formation, with remarkably similar mechanisms in fish and tetrapods. To further investigate the role of osteoblasts during formation of the cranial and axial skeleton, we generated a transgenic osx:CFP-NTR medaka line which enables conditional ablation of osterix expressing osteoblasts. By expressing a bacterial nitroreductase (NTR) fused to Cyan Fluorescent Protein (CFP) under control of the osterix promoter these cells become sensitive towards Metronidazole (Mtz). Mtz treatment of stable osx:CFP-NTR transgenic medaka for several consecutive days led to significant loss of osteoblasts by apoptosis. Live staining of mineralized bone matrix revealed reduced ossification in head skeletal elements such as cleithrum and operculum, as well as in the vertebral arches. Interestingly in Mtz treated larvae, intervertebral spaces were missing and the notochord sheath was often continuously mineralized resulting in the fusion of centra. We therefore propose a dual role for osx-positive osteoblasts in fish. Besides a role in bone deposition, we suggest an additional border function during mineralization of the chordal centra. After termination of Mtz treatment, osteoblasts gradually reappeared, indicating regenerative properties in this cell lineage. Taken together, the osx:CFP-NTR medaka line represents a valuable tool to study osteoblast function and regeneration at different stages of development in whole vertebrate specimens in vivo.