Suppressor of cytokine signaling (SOCS)-2 regulates normal postnatal growth and its deficiency in mice causes gigantism with increased bone length and proportional enlargement in skeletal muscles. Using C2C12 mesenchymal precursor cell line as a model, we investigated a possible role of SOCS-2 in the differentiation process of mesenchymal precursors. Stable transfection of SOCS-2 into C2C12 cells resulted in the acceleration of proliferation and survival, and inhibition of spontaneous myotube formation. In addition, SOCS-2 potentiated bone morphogenic protein (BMP)-induced transdifferentiation of C2C12 cells into osteoblast phenotypes. These effects of SOCS-2 on C2C12 cells differed strikingly from that of SOCS-1, another member of SOCS family, and its mechanisms were evaluated. SOCS-2 did not alter BMP-induced phosphorylation and nuclear accumulation of Smad1, nor the expression of inhibitory-Smads mRNA. However, SOCS-2 enhanced BMP-induced transcriptional activation of the Smad-responsive reporter gene, suggesting that the action of SOCS-2 is exerted at the transcriptional level. Interestingly, SOCS-2 overexpression in C2C12 cells increased the endogenous JunB protein, one of the key transcriptional factors in the control of BMP/Smad signaling responsiveness. In addition, the proteasome inhibitor enhanced JunB protein expression in C2C12 cells. Moreover, we found that SOCS-2 reduced JunB ubiquitination in COS-7 cells. Although SOCS-2 is a modulator of growth hormone (GH) signaling, the upregulation of JunB by SOCS-2 did not require GH signaling. Taken together, these results suggest that SOCS-2 positively regulates endogenous JunB protein expression in C2C12 cells through inhibition of JunB destabilization by the ubiquitin-proteasome pathway, and thereby regulates the cell fate of mesenchymal precursors.