Inactivating PHEX (phosphate regulating gene with homologies to endopeptidases on the X chromosome) mutations cause X-linked hypophosphatemia in humans and mice (Hyp) through overproduction of fibroblast growth factor 23 (FGF23) a phosphaturic factor, by osteocytes. Matrix extracellular phosphoglycoprotein (MEPE) is also elevated in Hyp and other hypophosphatemic disorders. In addition, the administration of an ASARM (acidic serine-aspartate rich MEPE-associated motif) peptide derived from MEPE causes phosphaturia and inhibits bone mineralization in mice, suggesting that MEPE also plays a role in phosphate homeostasis. Since recent studies found that MEPE binds specifically to PHEX in vitro, we tested the effect of recombinant-MEPE and its ASARM peptide on PHEX enzyme activity in vitro and FGF23 expression in bone marrow stromal cell cultures ex vivo. We found that both recombinant MEPE and synthetic phosphorylated ASARM peptide (ASARM-PO(4)) inhibit PHEX enzyme activities in an in vitro fluorescent-quenched PHEX enzyme activity assay. The ASARM-PO(4) peptide inhibits PHEX enzyme activity in a dose-dependent manner with a K(i) of 128 nM and V(max-i) of 100%. Recombinant MEPE also inhibits PHEX activity (K(i) = 2 nM and V(max-i) = 26%). Long-term bone marrow stromal cell cultures supplemented with 10 microM ASARM-PO(4) peptide resulted in significant elevation of FGF23 transcripts and inhibition of mineralization. These findings suggest that MEPE inhibits mineralization and PHEX activity and leads to increased FGF23 production. The resulting coordination of mineralization and release of a phosphaturic factor by MEPE may serve a physiological role in regulating systemic phosphate homeostasis to meet the needs for bone mineralization.