Osteogenic differentiation involves a cascade of coordinated gene expression that regulates cell proliferation and matrix protein formation in a defined temporo-spatial manner. Here we have used differential display to identify a novel zinc finger transcription factor (AJ18) that is induced during differentiation of bone cells in vitro and in vivo. The 64-kDa protein, encoded by a 7- kilobase mRNA, contains a Krüppel-associated box (KRAB) domain followed by 11 successive C(2)H(2) zinc finger motifs. AJ18 mRNA, which is also expressed in kidney and brain, is developmentally regulated in embryonic tibiae and calvariae, with little expression in neonate and adult animals. During osteogenic differentiation in vitro AJ18 mRNA is expressed as cells approach confluence and declines as bone formation occurs. Using bacterially expressed, His-tagged AJ18 in a target detection assay, we identified a consensus binding sequence of 5'-CCACA-3', which forms part of the consensus element for Runx2, a master gene for osteogenic differentiation. Overexpression of AJ18 suppressed Runx2-mediated transactivation of an osteocalcin promoter construct in transient transfection assays and reduced alkaline phosphatase activity in bone morphogenetic protein-induced C3H10T1/2 cells. These studies, therefore, have identified a novel zinc finger transcription factor in bone that can modulate Runx2 activity and osteogenic differentiation.