Bone morphogenetic proteins (BMPs), members of the transforming growth factor beta superfamily, have been identified by their ability to induce cartilage and bone from nonskeletal cells and have been shown to act as a ventral morphogen in Xenopus mesoderm. We isolated a murine homeobox-containing gene, distal-less 5 (mDlx5), as a BMP-inducible gene in osteoblastic MC3T3-E1 cells. Stable transfectants of MC3T3-E1 that overexpress mDlx5 mRNA showed increase in various osteogenic markers, a fourfold increase in alkaline phosphatase activity, a sixfold increase in osteocalcin production, and appearance in mineralization of extracellular matrix. Furthermore, mDlx5 was induced orthotopically in mouse embryos treated with BMP-4 and in fractured bone of adult mice. Consistent with these observations, we also found that injection of mDlx5 mRNA into dorsal blastomeres enhanced the ventralization of Xenopus embryos. These findings suggest that mDlx5 is a target gene of the BMP signaling pathway and acts as an important regulator of both osteogenesis and dorsoventral patterning of embryonic axis.