Osterix, a zinc finger transcription factor, is specifically expressed in osteoblasts and osteocytes of all developing bones. Because no bone formation occurs in Osx-null mice, Osterix is thought to be an essential regulator of osteoblast differentiation. We report that, in several mesenchymal and osteoblastic cell types, BMP-2 induces an increase in expression of the two isoforms of Osterix arising from two alternative promoters. We identified a consensus Sp1 sequence (GGGCGG) as Osterix binding regions in the fibromodulin and the bone sialoprotein promoters in vitro and in vivo. Furthermore, we show that Osterix is a novel substrate for p38 MAPK in vitro and in vivo and that Ser-73 and Ser-77 are the regulatory sites phosphorylated by p38. Our data also demonstrate that Osterix is able to increase recruitment of p300 and Brg1 to the promoters of its target genes fibromodulin and bone sialoprotein in vivo and that it directly associates with these cofactors through protein-protein interactions. Phosphorylation of Osterix at Ser-73/77 increased its ability to recruit p300 and SWI/SNF to either fibromodulin or bone sialoprotein promoters. We therefore propose that Osterix binds to Sp1 sequences on target gene promoters and that its phosphorylation by p38 enhances recruitment of coactivators to form transcriptionally active complexes.