We previously identified two distinct molecular subtypes of osteosarcoma through gene expression profiling. These subtypes are associated with distinct tumor behavior and clinical outcomes. Here, we describe mechanisms that give rise to these molecular subtypes. Using bioinformatic analyses, we identified a significant association between deregulation of the retinoblastoma (RB)-E2F pathway and the molecular subtype with worse clinical outcomes. Xenotransplantation models recapitulated the corresponding behavior for each osteosarcoma subtype; thus, we used cell lines to validate the role of the RB-E2F pathway in regulating the prognostic gene signature. Ectopic RB resets the patterns of E2F regulated gene expression in cells derived from tumors with worse clinical outcomes (molecular phenotype 2) to those comparable with those observed in cells derived from tumors with less aggressive outcomes (molecular phenotype 1), providing a functional association between RB-E2F dysfunction and altered gene expression in osteosarcoma. DNA methyltransferase and histone deacetylase inhibitors similarly reset the transcriptional state of the molecular phenotype 2 cells from a state associated with RB deficiency to one seen with RB sufficiency. Our data indicate that deregulation of RB-E2F pathway alters the epigenetic landscape and biological behavior of osteosarcoma.