Keratocan is an extracellular matrix protein that belongs to the small leucine-rich proteoglycan family that also includes lumican, biglycan, decorin, mimecan, and fibromodulin. Members of this family are known to play a role in regulating cellular processes such as proliferation and modulation of osteoprogenitor lineage differentiation. The aims of this study were to evaluate the expression pattern of the keratocan within the osteoprogenitor lineage and to assess its role in regulating osteoblast maturation and function. Results from gene expression analyses of cells at different maturation stages within the osteoblast lineage indicate that keratocan is differentially expressed by osteoblasts and shows little or no expression by osteocytes. During primary osteoblast cultures, high keratocan mRNA expression was observed on day 14, whereas lower expression was detected at days 7 and 21. To assess the effects of keratocan on osteoprogenitor cell differentiation, we evaluated primary calvarial cell cultures from keratocan-deficient mice. The mineralization of calvarial osteoblast cultures derived from keratocan null (Kera-/-) mice was lower than in wild-type osteoblast cultures. Furthermore, analysis of RNA derived from Kera-/- calvarial cell cultures showed a reduction in the mature osteoblast differentiation markers, that is, bone sialoprotein and osteocalcin. In addition, we have evaluated the bone formation in keratocan-deficient mice. Histomorphometric analysis indicated that homozygous knockout mice have significantly decreased rates of bone formation and mineral apposition. Taken together, our results demonstrate the expression of keratocan by osteoblast lineage cells and its ability to modulate osteoblast function.