Tissue-nonspecific alkaline phosphatase (TNAP) is essential for bone matrix mineralization, but the central mechanism for TNAP action remains undefined. We observed that ATP-dependent (45)Ca precipitation was decreased in calvarial osteoblast matrix vesicle (MV) fractions from TNAP-/- mice, a model of infantile hypophosphatasia. Because TNAP hydrolyzes the mineralization inhibitor inorganic pyrophosphate (PP(i)), we assessed phosphodiesterase nucleotide pyrophosphatase (PDNP/NTPPPH) activity, which hydrolyzes ATP to generate PP(i). Plasma cell membrane glycoprotein-1 (PC-1), but not the isozyme B10 (also called PDNP3) colocalized with TNAP in osteoblast MV fractions and pericellular matrix. PC-1 but not B10 increased MV fraction PP(i) and inhibited (45)Ca precipitation by MVs. TNAP directly antagonized inhibition by PC-1 of MV-mediated (45)Ca precipitation. Furthermore, the PP(i) content of MV fractions was greater in cultured TNAP-/- than TNAP+/+ calvarial osteoblasts. Paradoxically, transfection with wild-type TNAP significantly increased osteoblast MV fraction NTPPPH. Specific activity of NTPPPH also was twofold greater in MV fractions of osteoblasts from TNAP+/+ mice relative to TNAP-/- mice. Thus TNAP attenuates PC-1/NTPPPH-induced PP(i) generation that would otherwise inhibit MV-mediated mineralization. TNAP also paradoxically regulates PC-1 expression and NTPPPH activity in osteoblasts.