We recently defined an element (ACTAATTGG) within the rat osteocalcin (OC) promoter at -84 to -92 which provides approximately 70% of basal promoter activity in osteoblastic cell lines and binds a specific nuclear factor found in OC-producing ROS 17/2.8 osteosarcoma cells. Since this element closely resembles the recently described Msx-1 (Hox 7.1) homeodomain DNA binding cognate, we examined rodent osteoblastic cells lines for expression of Msx homeodomain-encoding messages. We have found and cloned a cDNA for rat Msx-2 (Hox 8.1) from a ROS 17/2.8 library and detect high levels of expression in various osteoblastic cell lines (ROS 17/2.8, RCT3, RCT1) as well as in culture passage 3 neonatal rat calvarial osteoblastic cells. Little to no expression was detected in phenotypically immature MC3T3E1 osteoblastic cells or in a variety of nonosteoblastic (ROS 25/1, C2C12, TRAB 11) mesenchymal cell lines. Dexamethasone (DEX) down-regulates Msx-2 message levels in both RCT3 and ROS 17/2.8 cells. Recombinant rat Msx-2 homeodomain expressed in Escherichia coli as a glutathione-S-transferase fusion protein binds to the rat OC promoter region -74 to -100 as determined by gel shift analysis. Recognition is dependent upon the intact ACTAATTGG motif at -84 to -92. In transient cotransfection assays using MC3T3E1 cells (which expresses very little or no endogenous Msx-2), Msx-2 suppresses the rat OC promoter 2- to 3-fold via the Msx-2 binding motif at -84 to -92. However, in ROS 17/2.8 cells, where a high level of endogenous Msx-2 mRNA is present, expression of exogenous Msx-2 does not suppress the rat OC promoter; surprisingly, Msx-2 further augments basal promoter activity by approximately 50-70%, again dependent upon the ACTAATTGG motif at -84 to -92. These data directly demonstrate that the Msx-2 homeodomain binds the rat OC promoter and that Msx-2 can act as a sequence-specific transcriptional regulator of the rat OC promoter in cultured osteoblastic cell lines. This activity is dependent upon the specific osteoblastic cellular context, similar to previous observations in nonosseous systems with other homeodomain transcription factors. These data suggest that Msx-2 may play a role in the transcriptional regulation of the osteoblast phenotype during development in the morphogenetic fields where it is expressed.