CP2 is a member of a family of transcription factors that regulate genes involved in events from early development to terminal differentiation. In an effort to understand how it selects its target genes we carried out a database search, and located several CP2 binding motifs in the promoter region of bone morphogenetic protein-4 (BMP4). BMP4 is a key regulator of cell fate and body patterning throughout development. For the CP2 binding motifs in BMP4 promoter region to be relevant in vivo, CP2 and BMP4 should be expressed together. We found that CP2b and CP2c, two potent transcriptional activators, are expressed in a manner similar to BMP4 during osteoblast differentiation of C3H10T1/2 cells. In in vitro assays, the CP2 proteins bound to two CP2 binding motifs (-715 to -676 and -147 to -118) in the BMP4 promoter, and luciferase reporter assays indicated that this binding was essential for transcription of BMP4 during osteoblast differentiation. Taken together, our data indicate that CP2b and CP2c play important roles during bone development by activating BMP4 transcription.