Zfp521, a 30 C2H2 Kruppel-like zinc finger protein, is expressed at high levels at the periphery of early mesenchymal condensations prefiguring skeletal elements and in all developing bones in the perichondrium and periosteum, in osteoblast precursors and osteocytes, and in chondroblast precursors and growth plate prehypertrophic chondrocytes. Zfp521 expression in cultured mesenchymal cells is decreased by BMP-2 and increased by PTHrP, which promote and antagonize osteoblast differentiation, respectively. In vitro, Zfp521 overexpression reduces the expression of several downstream osteoblast marker genes and antagonizes osteoblast differentiation. Zfp521 binds Runx2 and represses its transcriptional activity, and Runx2 dose-dependently rescues Zfp521's inhibition of osteoblast differentiation. In contrast, osteocalcin promoter-targeted overexpression of Zfp521 in osteoblasts in vivo results in increased bone formation and bone mass. We propose that Zfp521 regulates the rate of osteoblast differentiation and bone formation during development and in the mature skeleton, in part by antagonizing Runx2.