We analyzed the promoter activity of murine bone morphogenetic protein-4 (mBMP-4) and determined that the 5'-flanking region of exon I plays a critical role for transcription and position -265 to -246 of 5'-flanking region of mBMP-4 gene acts as a cis-element important for the regulation of BMP4 transcription in MC3T3E1 cells. By use of site-directed mutagenesis, we have established that the E-box, CACGTG, located within this short region of promoter, is essential for transcriptional activation of the mBMP-4 gene. Upstream stimulatory factor (USF), a member of the helix-loop-helix (HLH) group of regulatory proteins, was found to bind to this E-box using supershift gel mobility analysis. It is proposed that the HLH transcription regulatory proteins play an important role in mBMP-4 gene transcription in this osteoblastic cell line.