Bone morphogenetic protein (BMP)-2 plays a central role in bone-tissue engineering because of its potent bone-induction ability. However, the process of BMP-induced bone formation in vivo remains poorly elucidated. Here, we aimed to establish a method for intravital imaging of the entire process of BMP-2-induced ectopic bone formation. Using multicolor intravital imaging in transgenic mice, we visualized the spatiotemporal process of bone induction, including appearance and motility of osteoblasts and osteoclasts, angiogenesis, collagen-fiber formation, and bone-mineral deposition. Furthermore, we investigated how PTH1-34 affects BMP-2-induced bone formation, which revealed that PTH1-34 administration accelerated differentiation and increased the motility of osteoblasts, whereas it decreased morphological changes in osteoclasts. This is the first report on visualization of the entire process of BMP-2-induced bone formation using intravital imaging techniques, which, we believe, will contribute to our understanding of ectopic bone formation and provide new parameters for evaluating bone-forming activity.