To examine the autocrine effects that an organizing extracellular matrix has on osteoblast precursors, we created MC3T3-E1 cell lines that stably expressed pro-alpha1(I) collagen chains with a truncated triple helical domain. Cells that had incorporated the pro-alpha1(I) expression plasmid (pMG155) expressed shortened pro-alpha1(I) transcripts at high levels and efficiently secreted the expression gene products into culture media. Those cells lost over 30% of newly deposited collagenous matrix compared with virtually no loss in control cultures, and media from the abnormal cells had qualitative differences in matrix metalloprotinase production. Electron micrographs strongly suggested that type I collagen molecules containing the truncated pro-alpha1(I) chains dramatically interfered with collagen fibrillogenesis in newly forming osteoblast matrix. Abnormal collagen fibrillogenesis was also associated with altered characteristics of cellular differentiation in that abnormal cells displayed a delayed and attenuated increase in alkaline phosphatase activity. Surprisingly, synthesis of osteocalcin was more than 5-fold higher than control cultures. These findings demonstrate that osteoblasts require a normally structured collagenous matrix for up-regulation of alkaline phosphatase activity. However, in the presence of rapid turnover of osteoblast matrix, osteocalcin gene expression may be up-regulated in response to local signals by an unknown mechanism.