HTLV-I infection can result in adult T cell leukemia with accompanying hypercalcemia and increased bone resorption. A viral etiology has also been invoked for Paget's disease, a disease of high bone turnover. Delineation of pathogenetic mechanisms of viral-associated bone diseases has been impeded by the complexity of viral and host factors. In order to consider the relationship of HTLV-I infection to skeletal changes we have evaluated the role of a single viral gene in mice transgenic for HTLV-I tax under the control of the viral promoter. Tax mice exhibited severe skeletal abnormalities characterized by high bone turnover, increases in osteoblast and osteoclast numbers and activity, and myelofibrosis. These changes were apparent as early as two months of age. Tax mRNA and protein were highly expressed in bone but not in bone marrow nor in any other tissues except, as previously reported, salivary gland and neurofibromas when they did develop. Within bone, tax protein was detected in only two cell types, mature osteoclasts and spindle-shaped cells within the endosteal myelofibrosis. These observations suggest that local expression of the tax gene, which encodes a viral regulatory protein known to influence host gene expression, can induce within the bone environment marked changes in bone cell activity, resulting in profound skeletal alterations.