Gene-trap mutagenesis is based on the notion that the random insertion of a trapping vector may disturb the function of inserted genes. To identify the genes involved in chondrocytic differentiation, we applied this method to a murine mesenchymal cell line, ATDC5, which differentiate into mature chondrocytes in the presence of insulin, and isolated a clone in which the gene encoding a transcription/replication factor, nuclear factor I-B (NFIB), was trapped. In this particular clone, named #7-57, the trap vector pPT1-geo was inserted into intron 6 of the NFIB gene in one of the alleles. As a result, both wild-type NFIB and a mutant protein lacking the carboxyl-terminal transactivation/repression domain were expressed in the clone. Immunoprecipitation/Western blotting confirmed the interaction between wild-type NFIB and the truncated protein derived from the trapped allele, suggesting that the mutant protein formed a heterodimer with wild-type NFI proteins. When cultured in the differentiation medium, #7-57 exhibited impaired nodule formation and less accumulation of cartilageous matrices compared with the parental ATDC5 cells. In addition, the expression of marker genes for proliferating chondrocytes, including type II collagen (Col2a1), matrillin-1, and PTHrP, was reduced in the clone. The expression of SOX9 was also slightly decreased in the clone #7-57 compared with the parental cells. The overexpression of wild-type NFIB in parental ATDC5 cells resulted in the increased expression of Col2a1, and a series of reporter assays using a Col2a1 promoter/enhancer-luciferase construct demonstrated the transcriptional regulation of the gene by NFIB and the dominant-negative effect of the truncated mutant derived from the trapped allele. Interestingly, mutation in the SOX9-binding site in the 48-bp cis-element located in intron 1 failed to abolish the transactivation of Col2a1 gene by NFIB, suggesting that NFI regulates the transactivation of Col2a1, at least in part, independently of SOX9. These results indicate the critical roles of NFI family transcription/replication factors in the early stage of chondrocytic differentiation.