Fibroblast growth factor (FGF) signaling has been implicated in the regulation of osteogenesis in both intramembranous and endochondral ossifications. In the developing palate, the anterior bony palate forms by direct differentiation of cranial neural crest (CNC)-derived mesenchymal cells, but the signals that regulate the osteogenic cell fate in the developing palate remain unclear. In the present study, we investigated the potential role of FGF signaling in osteogenic fate determination of the palatal mesenchymal cells. We showed that locally activated FGF8 signaling in the anterior palate using a Shox2Cre knock-in allele and an R26RFgf8 allele leads to a unique palatal defect: a complete loss of the palatine process of the maxilla as well as formation of ectopic cartilaginous tissues in the anterior palate. This aberrant developmental process was accompanied by a significantly elevated level of cell proliferation, which contributes to an abnormally thickened palatal tissue, where the palatine process of the maxilla would normally form, and by a complete inhibition of Osterix expression, which accounts for the lack of bone formation. The coexpression of Runx2 initially with Sox9 and subsequently with Col II in the ectopic cartilaginous tissues indicates a conversion of osteogenic fate to a chondrogenic one. Consistent with the unique palatal phenotype, RNA-Sequencing analysis revealed that the augmented FGF8 signaling downregulated genes involved in ossification, biomineral tissue development, and bone mineralization but upregulated genes involved in cell proliferation, cartilage development, and cell fate commitment, which was further supported by quantitative real-time reverse transcription polymerase chain reaction validation of selected genes. Our results demonstrate that FGF8 signaling functions as a negative regulator of osteogenic fate and is sufficient to convert a subset of CNC cell-derived mesenchymal cells into cartilage in the anterior hard palate, which will have implications in future directed differentiation of CNC-derived precursor cells for clinical application.