Bone formation is exquisitely controlled in space and time. Heterotopic ossification (HO), the pathologic formation of extra-skeletal bone, occurs as a common complication of trauma or in genetic disorders and can be disabling and lethal. However, the underlying molecular mechanisms are largely unknown. Here we demonstrate that Gα s restricts bone formation to the skeleton by inhibiting Hedgehog (Hh) signaling in mesenchymal progenitor cells. In progressive osseous heteroplasia (POH), a human disease caused by null mutations in GNAS that encodes Gα s, HH signaling is upregulated in ectopic osteoblasts and progenitor cells. Ectopic Hh signaling is sufficient to induce HO, while Hh signaling inhibition blocks HO in animal models. As our previous work has shown that GNAS gain of function mutations upregulate WNT/β-Catenin signaling in fibrous dysplasia (FD), our findings identify Gα s as a critical regulator of osteoblast differentiation by maintaining a balance between two key signaling pathways: Wnt/β-catenin and Hh. HH signaling inhibitors developed for cancer therapy may be repurposed to treat HO and other diseases caused by GNAS inactivation.