Osteoactivin (OA) is a novel glycoprotein that is highly expressed during osteoblast differentiation. Using Western blot analysis, our data show that OA protein has two isoforms, one is transmembranous and the other is secreted into the conditioned medium of primary osteoblasts cultures. Fractionation of osteoblast cell compartments showed that the mature, glycosylated OA isoform of 115 kDa is found in the membranous fraction. Both OA isoforms (secreted and transmembrane) are found in the cytoplasmic fraction of osteoblasts. Overexpression of EGFP-tagged OA in osteoblasts showed that OA protein accumulates into vesicles for transportation to the cell membrane. We examined OA protein production in primary osteoblast cultures and found that OA is maximally expressed during the third week of culture (last stage of osteoblast differentiation). Glycosylation studies showed that OA isoform of 115 kDa is highly glycosylated. We also showed that retinoic acid (RA) stimulates the mannosylation of OA protein. In contrast, tunicamycin (TM) strongly inhibited N-glycans incorporation into OA protein. The functional role of the secreted OA isoform was revealed when cultures treated with anti-OA antibody, showed decreased osteoblast differentiation compared to untreated control cultures. Gain-of-function in osteoblasts using the pBABE viral system showed that OA overexpression in osteoblast stimulated their differentiation and function. The availability of a naturally occurring mutant mouse with a truncated OA protein provided further evidence that OA is an important factor for terminal osteoblast differentiation and mineralization. Using bone marrow mesenchymal cells derived from OA mutant and wild-type mice and testing their ability to differentiate into osteoblasts showed that differentiation of OA mutant osteoblasts was significantly reduced compared to wild-type osteoblasts. Collectively, our data suggest that OA acts as a positive regulator of osteoblastogenesis.