The formation of new bone during the process of bone remodeling occurs almost exclusively at sites of prior bone resorption. In an attempt to discover what regulatory pathways are utilized by osteoblasts to effect this site-specific formation event we probed components of an active bone resorption surface with an osteoblast phage expression library. In these experiments primary cultures of rat osteoblasts were used to construct a phage display library in T7 phage. Tartrate-resistant acid phosphatase (type V) (TRAP) was used as the bait in a biopanning procedure. 40 phage clones with very high affinity for TRAP were sequenced, and of the clones with multiple consensus sequences we identified a regulatory protein that modulates osteoblast differentiation. This protein is the TGF receptor-interacting protein (TRIP-1). Our data demonstrate that TRAP activation of TRIP-1 evokes a TGF-like differentiation process. Specifically, TRIP-1 activation increases the activity and expression of osteoblast alkaline phosphatase, osteoprotegerin, collagen, and Runx2. Moreover, we show that TRAP interacts with TRIP intracellularly, that activation of the TGF type II receptor by TRIP-1 occurs in the presence of TRAP and that the differentiation process is mediated through the Smad2/3 pathway. A final experiment demonstrates that osteoblasts, when cultured in osteoclast lacunae containing TRAP, rapidly and specifically differentiate into a mature bone-forming phenotype. We hypothesize that binding to TRAP may be one mechanism by which the full osteoblast phenotype is expressed during the process of bone remodeling.The formation of new bone during the process of bone remodeling occurs almost exclusively at sites of prior bone resorption. As there are 1-2 million active remodeling sites in an adult skeleton at any point in time (1), this spatial localization of formation plays a key role in maintaining skeletal architecture. Aberrant or disorganized formation could lead to architectural changes that would weaken skeletal structure.The observation that osteoclastic bone resorption precedes osteoblastic bone formation has been a well known characteristic of the cell activity in the basal metabolic unit (BMU) described by Frost (2), nearly 40 years ago. In a BMU, osteoclastic activation is followed by a reversal phase in which the osteoclast either migrates to another bony site or dies by apoptosis. Osteoblast bone formation then proceeds directly on the reversal line and if the two activities are matched in amount, a constant skeletal mass is preserved. Activation of osteoprogenitor cells in the immediate area of a resorption event has been attributed to the release of growth factors from the bone during osteoclast activity. This process, first termed coupling by Harris and Heany in 1969 (3, 4), accounts for the temporal sequence of resorption preceding formation. However, what has not been appreciated is that the formation occurs at the immediate sites were osteoclast activity occurred.In work performed by Gray, Jones, and Boyde (5,...