Osteocalcin is a hormonally regulated calcium-binding protein made almost exclusively by osteoblasts. In normal cells, osteocalcin expression requires ascorbic acid (AA), an essential cofactor for osteoblast differentiation both in vivo and in vitro. To determine the mechanism of this regulation, subclones of MC3T3-E1 preosteoblasts were transiently transfected with 1.3 kb of the mouse osteocalcin gene 2 promoter driving expression of firefly luciferase. AA stimulated luciferase activity 20-fold after 4-5 days. This response was stereospecific to L-ascorbic acid and was only detected in MC3T3-E1 subclones showing strong AA induction of the endogenous osteocalcin gene. Similar results were also obtained in MC3T3-E1 cells stably transfected with the osteocalcin promoter. A specific inhibitor of collagen synthesis, 3,4-dehydroproline, blocked AA-dependent induction of promoter activity, indicating that regulation of the osteocalcin gene requires collagen matrix synthesis. Deletion analysis of the mOG2 promoter identified an essential region for AA responsiveness between -147 and -116 bp. This region contains a single copy of the previously described osteoblast-specific element, OSE2. Deletion and mutation of OSE2 in DNA transfection assays established the requirement for this element in the AA response. Furthermore, DNA-binding assays revealed that MC3T3-E1 cells contain OSF2, the nuclear factor binding to OSE2, and that binding of OSF2 to OSE2 is up-regulated by AA treatment. Taken collectively, our results indicate that an intact OSE2 sequence is required for the induction of osteocalcin expression by AA.