Osteocalcin (OC) is a small calcium binding protein expressed in bones and teeth undergoing mineralization. OC expression in calvarial osteoblasts and odontoblasts is regulated in part via protein-protein interactions between the homeodomain repressor, Msx2, and components of the cell type-specific basal OC promoter. Recent work suggests that homeodomain proteins form heterodimers that confer transcriptional regulation. Since the homeodomain proteins Dlx5 and Msx2 are both expressed by primary rat calvarial osteoblasts, we examined whether Msx2 and Dlx5 functionally interact to regulate the OC promoter. In both primary rat calvarial and MC3T3E1 mouse calvarial osteoblasts, transient expression of Dlx5 only mildly augments basal OC promoter (luciferase reporter) activity, while Msx2 suppresses transcriptional activity by ca. 80%. However, Dlx5 completely reverses Msx2 repression of the OC promoter. Structure-function analyses using far-Western blot and transient cotransfection assays reveal that (i) Msx2 and Dlx5 can form dimers, (ii) Dlx5 residues 127-143 are necessary for dimerization and to reverse Msx2-dependent OC repression, and (iii) intrinsic DNA binding activity of Dlx5 is not required for OC regulation. Msx2 inhibits the DNA binding activity of a third complex, the OC fibroblast growth factor response element binding protein (OCFREB), that supports activity of the basal OC promoter. Dlx5 completely abrogates Msx2 suppression of OCFREB DNA binding activity, and residues required for Dlx5 transcriptional de-repression in vivo are also required for reversing inhibition of OCFREB binding in vitro. Finally, Dlx5 reverses Msx2 inhibition of OC promoter activation by FGF2/forskolin. Thus, Dlx5 regulates the expression of the OC promoter in calvarial osteoblasts in part by de-repression, antagonizing Msx2 repression of transcription factors that support basal OC promoter activity.