Three polymorphisms (-1997G/T; -1663IndelT and +1245G/T) have been identified in the 5' flank of COL1A1 gene that are associated with osteoporosis but the underlying mechanism is unclear. Here we investigated the functional effects of these variants on COL1A1 transcription. Transcription was 2-fold higher with the osteoporosis-associated G-del-T haplotype compared with the common G-Ins-G haplotype. Gel shift assays showed that the region surrounding the -1663IndelT polymorphism recognized a complex of proteins essential for osteoblast differentiation and function including Nmp4 and Osterix, and the osteoporosis-associated -1663delT allele had increased binding affinity for this complex. Chromatin immunoprecipitation assays confirmed that the region flanking -1663insdelT bound a complex of proteins including Osterix and Nmp4 and also showed evidence of recruitment of Nmp4 to the Sp1 binding site in intron 1. Further studies showed that haplotype G-del-T had higher binding affinity for RNA polymerase II, consistent with increased transcription of the G-del-T allele and there was a significant inverse association between carriage of G-del-T and bone mineral density (BMD) in a cohort of 3270 Caucasian women. We conclude that common polymorphic variants in the 5' flank of COLIA1 regulate transcription by affecting DNA-protein interactions and that increased levels of transcription correlate with reduced BMD values in vivo. This is consistent with a model whereby increased COL1A1 transcription predisposes to osteoporosis, probably by increasing production of the alpha 1 chain and disrupting the normal ratio of collagen type 1 alpha 1 and alpha 2 chains.