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Skeletal disorders, such as osteoarthritis and bone fractures, are among the major conditions that can compromise the quality of daily life of elderly individuals. To treat them, regenerative therapies using skeletal cells have been an attractive choice for patients with unmet clinical needs. Currently, there are two major strategies to prepare the cell sources. The first is to use induced pluripotent stem cells (iPSCs) or embryonic stem cells (ESCs), which can recapitulate the skeletal developmental process and differentiate into various skeletal cells. Skeletal tissues are derived from three distinct origins: the neural crest, paraxial mesoderm, and lateral plate mesoderm. Thus, various protocols have been proposed to recapitulate the sequential process of skeletal development. The second strategy is to extract stem cells from skeletal tissues. In addition to mesenchymal stem/stromal cells (MSCs), multiple cell types have been identified as alternative cell sources. These cells have distinct multipotent properties allowing them to differentiate into skeletal cells and various potential applications for skeletal regeneration. In this review, we summarize state-of-the-art research in stem cell differentiation based on the understanding of embryogenic skeletal development and stem cells existing in skeletal tissues. We then discuss the potential applications of these cell types for regenerative medicine.