To gain insights into the mechanism of action of sclerostin, a protein that regulates bone mass, we performed yeast two-hybrid analyses using human SOST (sclerostin) cDNA cloned into pGBKT7 DNA-binding domain vector as a bait, and a normalized, high-complexity, universal cDNA library in a GAL4 activating domain vector. We identified an interaction between sclerostin and the carboxyl-terminal portion of the receptor tyrosine-protein kinase erbB-3. To determine the biological relevance of this interaction, we treated MC3T3-E1 mouse osteoblast cells transfected with either a SOST expression plasmid or a control vector, with recombinant heregulin/neuregulin. Phospho-p44/42 (Thr202/Tyr204) MAPK was assessed in heregulin/neuregulin treated cells. We observed an increase in phospho-p44/42 (Thr202/Tyr204) MAPK concentrations in SOST transfected cells but not in cells transfected with a control vector, thus demonstrating a modulatory effect of sclerostin on heregulin/neuregulin signaling in osteoblasts. The data demonstrate that sclerostin functions in part, by modulating the activity of erbB-3.