Here we assess histone modification, chromatin remodeling, and DNA methylation processes that coordinately control the expression of the bone master transcription factor Sp7 (osterix) during mesenchymal lineage commitment in mammalian cells. We find that Sp7 gene silencing is mediated by DNA methyltransferase1/3 (DNMT1/3)-, histone deacetylase 1/2/4 (HDAC1/2/4)-, Setdb1/Suv39h1-, and Ezh1/2-containing complexes. In contrast, Sp7 gene activation involves changes in histone modifications, accompanied by decreased nucleosome enrichment and DNA demethylation mediated by SWI/SNF- and Tet1/Tet2-containing complexes, respectively. Inhibition of DNA methylation triggers changes in the histone modification profile and chromatin-remodeling events leading to Sp7 gene expression. Tet1/Tet2 silencing prevents Sp7 expression during osteoblast differentiation as it impairs DNA demethylation and alters the recruitment of histone methylase (COMPASS)-, histone demethylase (Jmjd2a/Jmjd3)-, and SWI/SNF-containing complexes to the Sp7 promoter. The dissection of these interconnected epigenetic mechanisms that govern Sp7 gene activation reveals a hierarchical process where regulatory components mediating DNA demethylation play a leading role.