To explore how the loss of Phex function contributes to the pathogenesis of osteomalacia, we examined the abnormalities of mineralization, Phex, and bone matrix protein expression occurring in Hyp mice in vivo and in ex vivo bone marrow cell cultures. The results in vivo show that mineralization was decreased significantly in Hyp mouse bone. Phex protein was identifiable in osteoblasts and osteocytes in wild-type mice, but not in Hyp mice. In Hyp mice, osteocalcin, bone sialoprotein, and vitronectin expression were down-regulated, whereas biglycan and fibrillin-1 expression were up-regulated in osteocytes and bone matrix relative to those in their wild-type counterparts. Parallel studies ex vivo demonstrated that cells derived from 18-day Hyp mouse bone marrow cell cultures had a 3'-Phex deletion, no Phex protein expression, decreased alkaline phosphatase activity, collagen deposition, and calcium accumulation, and reduced osteocalcin, bone sialoprotein, and vitronectin at both the protein and messenger RNA levels. Furthermore conditioned medium from Hyp mouse bone marrow cultures could induce analogous defects in bone marrow cell cultures of wild-type cells. These novel findings indicate that there is an intrinsic osteogenic cell differentiation defect in addition to the known hypomineralization of bone in Hyp mice, which may be inducible by an autocrine/paracrine secreted factor. These results suggest that alterations in the Phex gene may control bone matrix mineralization indirectly by regulating the synthesis and deposition of bone matrix proteins.