The molecular basis for the inverse relationship betweendifferentiation and tumorigenesis is unknown.The function of runx2, a master regulator of osteoblastdifferentiation belonging to theruntfamily of tumorsuppressor genes, is consistently disrupted in osteosarcomacell lines. Ectopic expression of runx2 induces p27KIP1,thereby inhibiting the activity of S-phase cyclin complexesand leading to the dephosphorylation of the retinoblastomatumor suppressor protein (pRb) and a G1 cell cyclearrest. Runx2 physically interacts with the hypophosphorylatedform of pRb, a known coactivator of runx2,Tthereby completing a feed-forward loop in which progressivecell cycle exit promotes increased expression ofthe osteoblast phenotype. Loss of p27KIP1perturbs transientand terminal cell cycle exit in osteoblasts. Consistent withthe incompatibility of malignant transformation and permanentcell cycle exit, loss of p27KIP1expression correlateswith dedifferentiation in high-grade human osteosarcomas.Physiologic coupling of osteoblast differentiation to cellcycle withdrawal is mediated through runx2 and p27KIP1,and these processes are disrupted in osteosarcoma.