Developmental control of bone tissue-specific genes requires positive and negative regulatory factors to accommodate physiological requirements for the expression or suppression of the encoded proteins. Osteocalcin (OC) gene transcription is restricted to the late stages of osteoblast differentiation. OC gene expression is suppressed in nonosseous cells and osteoprogenitor cells and during the early proliferative stages of bone cell differentiation. The rat OC promoter contains a homeodomain recognition motif within a highly conserved multipartite promoter element (OC box I) that contributes to tissue-specific transcription. In this study, we demonstrate that the CCAAT displacement protein (CDP), a transcription factor related to the cut homeodomain protein in Drosophila melanogaster, may regulate bone-specific gene transcription in immature proliferating osteoblasts. Using gel shift competition assays and DNase I footprinting, we show that CDP/cut recognizes two promoter elements (TATA and OC box I) of the bone-related rat OC gene. Overexpression of CDP/cut in ROS 17/2.8 osteosarcoma cells results in repression of OC promoter activity; this repression is abrogated by mutating OC box I. Gel shift immunoassays show that CDP/cut forms a proliferation- specific protein/DNA complex in conjunction with cyclin A and p107, a member of the retinoblastoma protein family of tumor suppressors. Our findings suggest that CDP/cut may represent an important component of a cell signaling mechanism that provides cross-talk between developmental and cell cycle- related transcriptional regulators to suppress bone tissue-specific genes during proliferative stages of osteoblast differentiation.