Transforming growth factor  (TGF-) is a potent multifunctional regulator of cell growth and differentiation. Although nearly all cells synthesize and respond to TGF-, bone and cartilage are particularly rich in this growth factor (6, 46). TGF-1, the prototypic member of the TGF- superfamily, elicits diverse cellular responses, including (i) inhibition of adipogenesis and myogenesis and (ii) stimulation of chondrogenesis and osteogenesis (31). TGF-1 stimulates the synthesis of matrix proteins and their receptors (for example, fibronectin, fibronectin receptor, collagen, osteonectin, osteopontin, and integrins) and inhibits matrix degradation by increasing the production of protease inhibitors and decreasing the production of proteases (42). Members of the TGF- superfamily with important effects on bone cell differentiation are bone morphogenetic proteins (BMPs) (17, 41), which were first identified as factors that induce bone formation in vivo when implanted into muscular tissues (54). Unlike TGF-, which induces new bone formation only when injected near bone, BMPs produce bone formation even when injected into ectopic sites. TGF- and BMPs bind to distinct receptors, TGF- type I and II receptors for TGF- and BMP type I and II receptors for BMPs. Following ligand binding, the receptor-associated kinase is activated and phosphorylates Smads, which move into the nucleus to stimulate the transcription of a set of target genes. Smad2 and -3 are activated by TGF- receptors and mediate TGF- responses, whereas Smad1, -5, and -8 are activated by BMP receptors and transduce BMP signals (15,32,57).The pluripotent mesenchymal precursor cell line C2C12 provides a model system to study the early stage of osteoblast differentiation during bone formation in muscular tissues. In this model, TGF-1 inhibits the differentiation of C2C12 cells into multinucleated myotubes without inducing osteoblast phenotypes. BMP-2 not only inhibits the terminal differentiation of C2C12 cells but also induces osteoblast phenotypes (20). Therefore, the C2C12 model is useful for analyzing both the common and specific signaling mechanisms of TGF- and BMPs. In C2C12 cells, overexpression of Smad1 and Smad5 induced alkaline phosphatase (ALP) activity, a typical osteoblast-specific marker, and inhibited muscle-specific gene expression (11,36,56). These results suggested that BMP functions via either Smad1 or Smad5 and that the induction of the osteoblast phenotype and the inhibition of myogenic differentiation are regulated at the transcriptional level. However, the molecular mechanisms through which Smads block myogenic differentiation and induce osteogenic differentiation are not known.Runx/PEBP2/Cbf (hereafter referred to as Runx) is a sequence-specific DNA binding protein that recognizes a specific DNA sequence originally identified as the binding site for