Basic helix-loop-helix (bHLH) transcription factors are implicated in cell lineage determination and differentiation. Dermo-1 encodes a bHLH transcription factor that shares extensive homology with another bHLH transcription factor, Twist. We have cloned and characterized human Dermo-1 from two different bone cytoplasmic DNA (cDNA) libraries. Dermo-1 mRNA and protein expression were examined in human embryo and adult tissue sections. Dermo-1 is expressed in a subset of mesodermally and ectodermally derived tissues. We further examined expression of Dermo-1/Twist in human tissues and cell lines. In addition, we observed Dermo-1 expression in response to basic fibroblast growth factor in osteoblastic cell lines. To evaluate the functionality of the human Dermo-1 transcription factor in osteoblast metabolism, we made stable osteoblastic cell lines that over- and underexpress human Dermo-1. These cell lines were analyzed and compared with previously published data of similar cell lines transfected with Twist. Our results demonstrate that Dermo-1 caused changes similar to Twist in the osteogenic properties of osteoblastic cells, such as morphology, bone marker gene expression, and biochemical response to cytokines. However, Dermo-1 expression also has unique effects in regulating the mechanism of proliferation, on alkaline phosphatase enzyme activity, and in temporal expression patterns. We speculate that expression of Twist and Dermo-1 maintains cells in an osteoprogenitor or preosteoblast-like state, respectively, and prevents premature or ectopic osteoblast differentiation. Therefore, Twist and Dermo-1 must be sequentially downregulated in order to initiate the cascade of events responsible for osteogenic cell differentiation. These results indicate that, during osteoblast development, Dermo-1 may inhibit osteoblast maturation and maintain cells in a preosteoblast phenotype by utilizing mechanisms similar but not identical to those utilized by Twist.