Cell differentiation is determined by a certain set of transcription factors such as MyoD in myogenesis. However, transcription factors that play a positive role in phenotypic gene expression in skeletal cells are largely unknown, except the recently identified CBFA1. Scleraxis is a helix-loop-helix-type transcription factor whose transcripts are expressed in sclerotome and in a certain set of skeletal cells; however, nothing is known about its function with regard to the regulation of cell function. To examine possible roles of scleraxis, we overexpressed scleraxis in osteoblastic ROS17/2.8 cells, which express low levels of scleraxis. Scleraxis overexpression enhanced expression of the aggrecan gene, which is not normally expressed at high levels in these osteoblastic cells. Overexpression of scleraxis also increased mRNA levels of type II collagen and osteopontin while suppressing expression of osteoblast phenotype-related genes encoding type I collagen and alkaline phosphatase. Transient transfection experiments indicated that scleraxis enhanced the chloramphenicol acetyltransferase activity of the reporter construct AgCAT-8, which contained an 8-kilobase pair (kb) fragment of the aggrecan gene including both the promoter and its first intron. Deletion analysis identified a 1-kb region that is responsive to scleraxis within the aggrecan gene. This region contains two adjacent E-box sequences. A 29-base pair DNA fragment (AgE) containing these E-box sequences bound to proteins in the ROS17/2.8 cell nuclear extracts as well as to in vitro translated scleraxis. This binding was competed with unlabeled AgE, but not with a mutated E-box DNA sequence (mAgE), indicating the specificity of the binding activity. The AgE binding activity in the ROS17/2.8 cell nuclear extracts was enhanced in the cells overexpressing scleraxis and was supershifted by the antiserum raised against scleraxis. Furthermore, AgE, but not mAgE, conferred responsiveness to scleraxis overexpression to a heterologous promoter. Finally, replacement mutation of the AgE sequence within the 2.5-kb AgCAT-1 construct significantly reduced its responsiveness to scleraxis. These results indicate that overexpression of a single helix-loop-helix-type transcription factor, scleraxis, enhances aggrecan gene expression via binding to the E-box-containing AgE sequence in ROS17/2.8 cells.