Insulin-like growth factor binding protein (IGFBP)-6 has been reported to inhibit differentiation of myoblasts and osteoblasts. In the current study, we explored the mechanisms underlying IGFBP-6 effects on osteoblast differentiation. During MC3T3-E1 osteoblast differentiation, we found that IGFBP-6 protein was down-regulated. Overexpression of IGFBP-6 in MC3T3-E1 and human bone cells inhibited nodule formation, osteocalcin mRNA expression and ALP activity. Furthermore, accumulation of IGFBP-6 in the culture media was not required for any of these effects suggesting that IGFBP-6 suppressed osteoblast differentiation by an intracellular mechanism. A yeast two-hybrid screen of an osteosarcoma library was conducted to identify intracellular binding partners to account for IGFBP-6 inhibitory effects on osteoblast differentiation. LIM mineralizing protein (LMP-1) was identified as a high affinity IGFBP-6 binding partner. Physical interaction between IGFBP-6 and LMP-1 was confirmed by co-immunoprecipitation. Fluorescent protein fusion constructs for LMP-1 and IGFBP-6 were transiently transfected into osteoblasts to provide evidence of subcellular locations for each protein. Coexpression of LMP-1-GFP and IGFBP-6-RFP resulted in overlapping subcellular localization of LMP-1 and IGFBP-6. To determine if there was a functional association of IGFBP-6 and LMP-1 as well as a physical association, we studied the effect of IGFBP-6, LMP-1 and their combination on type I procollagen promoter activity. LMP-1 increased promoter activity while IGFBP-6 reduced promoter activity, and coexpression of LMP-1 with IGFBP-6 abrogated IGFBP-6 suppression. These studies provide evidence that overexpression of IGFBP-6 suppresses human and murine osteoblast differentiation, that IGFBP-6 and LMP-1 physically interact, and supports the conclusion that this interaction may be functionally relevant.