Dentin matrix protein 1 (DMP1) is a bone- and teeth-specific protein initially identified from mineralized dentin. Here we report that DMP1 is primarily localized in the nuclear compartment of undifferentiated osteoblasts. In the nucleus, DMP1 acts as a transcriptional component for activation of osteoblast-specific genes like osteocalcin. During the early phase of osteoblast maturation, Ca(2+) surges into the nucleus from the cytoplasm, triggering the phosphorylation of DMP1 by a nuclear isoform of casein kinase II. This phosphorylated DMP1 is then exported out into the extracellular matrix, where it regulates nucleation of hydroxyapatite. Thus, DMP1 is a unique molecule that initiates osteoblast differentiation by transcription in the nucleus and orchestrates mineralized matrix formation extracellularly, at later stages of osteoblast maturation. The data presented here represent a paradigm shift in the understanding of DMP1 function. This information is crucial in understanding normal bone formation, remodeling, fracture healing, and skeletal tissue repair.