Transgenic mice expressing human T cell leukemia virus type I (HTLV-I)- tax under the control of HTLV-I-long terminal repeat (LTR) promoter develop skeletal abnormalities with high bone turnover and myelofibrosis. In these animals, Tax is highly expressed in bone with a pattern of expression restricted to osteoclasts and spindle-shaped cells within the endosteal myelofibrosis. To test the hypothesis that lineage-specific transcription factors promote transgene expression from the HTLV-I-LTR in osteoclasts, we first examined tax expression in transgenic bone marrow cultures. Expression was dependent on 1α, 25-dihydroxycholecalciferol and coincided with tartrate-resistant acid phosphatase (TRAP) expression, a marker of osteoclast differentiation. Furthermore, Tax was expressed in vitronectin receptor- positive mononuclear precursors as well as in mature osteoclast-like cells (OCLs). Consistent with our hypothesis, electrophoretic mobility shift assays revealed the presence of an OCL nuclear factor (NFOC-1) that binds to the LTR 21-base pair direct repeat, a region critical for the promoter activity. This binding is further enhanced by Tax. Since NFOC-1 is absent in macrophages and conserved in osteoclasts among species including human, such a factor may play a role in lineage determination and/or in expression of the differentiated osteoclast phenotype.