Osteotesticular protein tyrosine phosphatase (OST-PTP; OST), is a signaling molecule which catalyzes the removal of phosphates from tyrosine residues. It is known to be highly regulated in bone cells and has been shown to be important for the in vitro progression from a preosteoblast to a mature, mineralizing cell. However, the in vivo expression of this phosphatase during skeletogenesis has not been examined. Using Northern analysis and in situ hybridization (ISH), we have observed that this gene is strongly expressed early during the formation of the mouse skeleton. By 12.5 days postcoitum (dpc), expression of OST mRNA transcripts increases and is localized within the mesenchyme of craniofacial bones, ribs, limbs, and Meckel's cartilage. Following initiation of chondrogenesis, OST mRNA becomes restricted to the perichondrium of all endochondral elements. With ossification, this gene is also expressed by cells, presumably osteoblasts, at the chondro-osseous border and along cortical and trabecular bone surfaces. Unlike other bone markers examined such as Osterix and type II collagen, OST transcripts do not appear to be expressed by chondrocytes of epiphyseal cartilage or by non-hypertrophic or hypertrophic chondrocytes. Because the temporal expression patterns of OST and Runx2 were similar suggesting a potential interrelationship in bone regulation and function, OST expression was examined in transgenic mice lacking a functional Runx2/Cbfal protein (Runx2/Cbfal delta C (deltaC)) and possessing a cartilaginous skeleton. Interestingly, the OST gene was expressed with localization similar in wild-type, homozygous, and heterozygous embryos. These studies suggest that the expression of the OST gene may be important during skeletogenesis, potentially from commitment of mesenchymal cells to the ossification of new bones. Early in embryogenesis, regulation of OST expression may be independent of Runx2/Cbfa1.