Osteocalcin, the major non-collagenous protein in bone, is transcribed in osteoblasts at the onset of extracellular matrix mineralization. In this study it was demonstrated that sequences located in the first exon of the human osteocalcin gene possess a differentiation-related osteocalcin silencer element (OSE). Osteocalcin was rendered transcribable in UMR-106 cells and proliferating normal osteoblasts after deletion of the -3 to +51 region. Site-specific mutagenesis of this region revealed that a 7 bp sequence (TGGCCCT) (+29 to +35) is critical for silencing function. Mobility shift assays demonstrated that a nuclear factor bound to the OSE. The OSE binding protein was present in proliferating normal pre-osteoblasts and in UMR-106 and ROS 17/2.8 osteosarcoma cells, but was absent from post-proliferative normal osteoblasts. The binding protein was inhibited by fragments containing the +29/+35 sequence, but not by other promoter fragments or by the consensus oligomers of unrelated nuclear factors AP-1 and Sp1. DNase 1 footprinting demonstrated that the OSE binding-protein protected the +17 to +36 portion of the first exon, consistent with the results of mapping studies and competitive mobility shift assays. It is hypothesized that this silencer is activated by complexing of the OSE binding protein to the OSE during the osteoblast proliferation stage and that the OSE binding protein is down-regulated at the onset of extracellular matrix mineralization.