Ectopic expression of the transcription factor Fra-1 in transgenic mice leads to osteosclerosis, a bone disorder characterized by increased bone mass. The molecular basis for this phenotype is unknown and Fra-1 functions cannot be studied by a conventional loss-of-function approach, since fra-1-knockout mice die in utero likely due to placental defects. Here we show that the lethality of fra-1-knockout mice can be rescued by specific deletion of Fra-1 only in the mouse embryo and not in the placenta. Mice lacking Fra-1 (fra-1(delta/delta)) are viable and develop osteopenia, a low bone mass disease. Long bones of fra-1(delta/delta) mice appear to have normal osteoclasts but express reduced amounts of bone matrix components produced by osteoblasts and chondrocytes such as osteocalcin, collagen1a2 and matrix Gla protein. The gene for matrix Gla protein seems to be a specific target of Fra-1 since its expression was markedly increased in the long bones of fra-1-transgenic mice. These results uncover a novel function of Fra-1 in regulating bone mass through bone matrix production by osteoblasts and chondrocytes.