Hedgehog (Hh) family members are involved in multiple cellular processes including proliferation, migration, differentiation, and cell fate determination. Recently, the novel Hh agonists Hh-Ag 1.3 and 1.7 were identified in a high-throughput screening of small molecule compounds that activate the expression of Gli1, a target of Hh signaling. This study demonstrates that Hh-Ag 1.3 and 1.7 strongly activate the expression of endogenous Gli1 and promote osteoblast differentiation in the mesenchymal stem cell line C3H10T1/2. Both compounds stimulated alkaline phosphatase activity in a dose-dependent manner, and induced osteoblast marker gene expression in C3H10T1/2 cells, which indicated that they had acquired an osteoblast identity. Of the markers, the expression of osterix/Sp7, a downstream target of runt-related transcription factor (Runx)2, was induced by Hh-Ag 1.7, which also rescued the osteoblast differentiation defect of RD-127, a mesenchymal cell line from Runx2-deficient mice. Hh-Ags also activated canonical Wnt signaling and synergized with low doses of BMP-2 to enhance osteoblastic potential. Thus, Hh-Ag 1.7 could be useful for bone healing in individuals with abnormalities in osteogenesis, such as osteoporosis patients and the elderly, and can contribute to the development of novel therapeutics for the treatment of bone fractures and defects.