Parathyroid hormone (PTH) and PTH-related protein (PTHrP) activate one single receptor (PTH1R) which mediates catabolic and anabolic actions in the bone. Activation of PTH1R modulates multiple intracellular signaling responses. We previously reported that PTH and PTHrP down-regulate pERK1/2 and cyclin D1 in differentiated osteoblasts. In this study we investigate the role of MAPK phosphatase-1 (MKP-1) in PTHrP regulation of ERK1/2 activity in relation to osteoblast proliferation, differentiation and bone formation. Here we show that PTHrP increases MKP-1 expression in differentiated osteoblastic MC3T3-E1 cells, primary cultures of differentiated bone marrow stromal cells (BMSCs) and calvarial osteoblasts. PTHrP had no effect on MKP-1 expression in proliferating osteoblastic cells. Overexpression of MKP-1 in MC-4 cells inhibited osteoblastic cell proliferation. Cell extracts from differentiated MC-4 cells treated with PTHrP inactivate/dephosphorylate pERK1/2 in vitro; immunodepletion of MKP-1 blocked the ability of the extract to dephosphorylate pERK1/2; these data indicate that MKP-1 is involved in PTHrP-induced pERK1/2 dephosphorylation in the differentiated osteoblastic cells. PTHrP regulation of MKP-1 expression is partially dependent on PKA and PKC pathways. Treatment of nude mice, bearing ectopic ossicles, with intermittent PTH for 3weeks, up-regulated MKP-1 and osteocalcin, a bone formation marker, with an increase in bone formation. These data indicate that PTH and PTHrP increase MKP-1 expression in differentiated osteoblasts; and that MKP-1 induces growth arrest of osteoblasts, via inactivating pERK1/2 and down-regulating cyclin D1; and identify MKP-1 as a possible mediator of the anabolic actions of PTH1R in mature osteoblasts.