To elucidate regulatory mechanism(s) underlying differentiation of osteoblasts, we examined involvement of helix-loop-helix (HLH)-type transcription factors in osteoblast-specific expression of a phenotypic marker gene which encodes osteocalcin, a major noncollagenous bone matrix protein, exclusively expressed in osteoblasts. Overexpression of a dominant negative HLH protein, Id-1, decreased the activity of the 1.1-kb osteocalcin gene promoter cotransfected into rat osteoblastic osteosarcoma ROS17/2.8 cells. Analysis of deletion mutants revealed that a 264-bp fragment of osteocalcin promoter (-198 to +66) was sufficient for the Id-1-dependent suppression. Furthermore, the activity of the same promoter fragment (-198 to +66) was enhanced when antisense Id-1 expression vector was cotransfected. This osteocalcin gene promoter region contains two sites of an E-box motif, a consensus binding site for HLH proteins, which we refer to as OCE1 (CACATG, at -102) and OCE2 (CAGCTG, at -149), respectively. Mutagenesis in OCE1 but not OCE2 led to greater than 50% reduction in transcriptional activity of the osteocalcin gene promoter. Electrophoresis mobility shift assay indicated that factors in nuclear extracts prepared from ROS17/2.8 cells bound to the 30-bp oligonucleotide probe containing the E-box motif of OCE1. This binding was competed out by OCE1 oligonucleotide but neither by OCmE1 oligonucleotide in which E-box motif was mutated nor by OCE2. The OCE1-binding activity in the nuclear extracts of ROS17/2.8 cells was reduced by 70% when bacterially expressed Id-1 protein was added to the reaction mixture, suggesting the involvement of HLH proteins in the DNA/protein complex formation. In contrast to the osteoblast-like cells, OCE1-binding activity in the nuclear extracts of C3H10T1/2 fibroblasts was very low. However, when these fibroblasts were treated with recombinant human bone morphogenetic protein-2 which induced expression of osteocalcin as well as other phenotypic markers of osteoblasts, OCE1-binding activity was increased approximately 40-fold, indicating that OCE1 would be involved in the tissue-specific expression of the osteocalcin gene. These findings indicated for the first time that osteoblast-specific gene transcription is regulated via the interaction between certain E-box binding transcription factor(s) in osteoblasts and the OCE1 sequence in the promoter region of the osteocalcin gene.