High concentrations of prostaglandin E2 (PGE2) inhibit collagen synthesis and reduce alpha 1(I)procollagen messenger RNA (mRNA) levels in cultured fetal rat calvariae. To examine the mechanism of this effect, we used the immortalized rat osteoblastic clonal cell line, Py1a. PGE2 at 1 microM inhibited the incorporation of [3H]proline into collagenase-digestible protein (CDP) and increased incorporation into noncollagen protein, whereas 0.1 microM PGE2 increased both CDP and noncollagen protein labeling. Because insulin-like growth factor-I (IGF-I) is an anabolic hormone in bone and PGE2 can increase its production, we added exogenous IGF-I (10 nM) to Py1a cultures. In the presence of IGF-I, PGE2 from 10 nM to 1 microM had only an inhibitory effect on CDP labeling and alpha 1(I)procollagen mRNA levels. PGE2 at 1 microM decreased the rate of alpha 1(I)procollagen gene transcription in the presence or absence of IGF-I, determined by a nuclear run-on assay. Py1a cells were stably transfected with chimeric genes containing varying lengths of the 5'-upstream region of the rat alpha 1(I)procollagen promoter fused to the chloramphenicol acetyl transferase (CAT) reporter gene. In cells transfected with ColCAT 3.6, which contains 3520 base pairs of 5'-upstream DNA, CAT activity was inhibited by PGE2, but the inhibition was less than that observed for CDP labeling. With smaller 5'-upstream regions, there was no inhibitory effect of PGE2. These results demonstrate that PGE2 inhibits alpha 1(I)procollagen gene transcription and the activity of a region between -3.5 and -2.3 kilobases of the 5'-upstream collagen gene promoter.(ABSTRACT TRUNCATED AT 250 WORDS)