CCAAT enhancer-binding protein (C/EBP) transcription factors regulate adipocyte differentiation, and recent evidence suggests that osteoblasts and adipocytes share a common pluripotent progenitor in bone marrow. However, little is known about the role of C/EBP transcription factors in the control of osteoblast differentiation or function. In this study, the function of C/EBP transcription factors was disrupted in osteoblast lineage cells by overexpressing a naturally occurring dominant negative C/EBP isoform. Expression of FLp20C/EBPbeta was driven by a 3.6-kb Col1a1 promoter/first intron construct, and four transgenic (TG) mouse lines were established. Northern blotting and reverse transcription-PCR indicated that the transgene was targeted to bone, with lower levels of expression in lung, skin, and adipose tissue. TG mice from two lines showed reduced body weight compared with wild type littermates. All TG lines showed evidence of osteopenia, ranging from mild to severe, as evidenced by reduced trabecular bone volume. Severely affected lines also showed reduced cortical bone width. Dynamic histomorphometry demonstrated an associated decrease in mineral apposition and bone formation rates. Long bones and calvariae of TG mice showed reduced COL1A1 and osteocalcin mRNA levels and increased bone sialoprotein mRNA, consistent with an inhibition of terminal osteoblast differentiation. Ex vivo analysis of primary osteoblast differentiation showed similar effects on marker expression and reduced expression of the mature osteoblast marker Col2.3-green fluorescent protein, demonstrating a cell-autonomous effect of the transgene. These data suggested that C/EBP transcription factors may be important determinants of osteoblast function and bone mass.