The formation of new bone during the process of bone remodeling occurs almost exclusively at sites of prior bone resorption. In an attempt to discover what regulatory pathways are utilized by osteoblasts to effect this site-specific formation event we probed components of an active bone resorption surface with an osteoblast phage expression library. In these experiments primary cultures of rat osteoblasts were used to construct a phage display library in T7 phage. Tartrate-resistant acid phosphatase (type V) (TRAP) was used as the bait in a biopanning procedure. 40 phage clones with very high affinity for TRAP were sequenced, and of the clones with multiple consensus sequences we identified a regulatory protein that modulates osteoblast differentiation. This protein is the TGFbeta receptor-interacting protein (TRIP-1). Our data demonstrate that TRAP activation of TRIP-1 evokes a TGFbeta-like differentiation process. Specifically, TRIP-1 activation increases the activity and expression of osteoblast alkaline phosphatase, osteoprotegerin, collagen, and Runx2. Moreover, we show that TRAP interacts with TRIP intracellularly, that activation of the TGFbeta type II receptor by TRIP-1 occurs in the presence of TRAP and that the differentiation process is mediated through the Smad2/3 pathway. A final experiment demonstrates that osteoblasts, when cultured in osteoclast lacunae containing TRAP, rapidly and specifically differentiate into a mature bone-forming phenotype. We hypothesize that binding to TRAP may be one mechanism by which the full osteoblast phenotype is expressed during the process of bone remodeling.