Differentiation of committed osteoblasts is controlled by complex activities involving signal transduction and gene expression, and Runx2 and Osterix function as master regulators for this process. Recently, CCAAT/enhancer-binding proteins (C/EBPs) have been reported to regulate osteogenesis in addition to adipogenesis. However, the roles of C/EBP transcription factors in the control of osteoblast differentiation have yet to be fully elucidated. Here we show that C/EBP homologous protein (CHOP; also known as C/EBPzeta) is expressed in bone as well as in mesenchymal progenitors and primary osteoblasts. Overexpression of CHOP reduces alkaline phosphatase activity in primary osteoblasts and suppresses the formation of calcified bone nodules. CHOP-deficient osteoblasts differentiate more strongly than their wild-type counterparts, suggesting that endogenous CHOP plays an important role in the inhibition of osteoblast differentiation. Furthermore, endogenous CHOP induces differentiation of calvarial osteoblasts upon bone morphogenetic protein (BMP) treatment. CHOP forms heterodimers with C/EBPbeta and inhibits the DNA-binding activity as well as Runx2-binding activity of C/EBPbeta, leading to inhibition of osteocalcin gene transcription. These findings indicate that CHOP acts as a dominant-negative inhibitor of C/EBPbeta and prevents osteoblast differentiation but promotes BMP signaling in a cell-type-dependent manner. Thus, endogenous CHOP may have dual roles in regulating osteoblast differentiation and bone formation.