Connective tissue growth factor (CTGF/CCN2) is a cysteine-rich, extracellular matrix (ECM) protein that acts as an anabolic growth factor to regulate osteoblast differentiation and function. Recent studies have identified CTGF as a downstream effector of transforming growth factor-β1 (TGF-β1) for certain functions in specific cell types. In this study, we examined the role of CTGF as a downstream mediator of TGF-β1-induced ECM production and cell growth in osteoblasts. Using primary cultures, we demonstrated that TGF-β1 is a potent inducer of CTGF expression in osteoblasts, and that this induction occurred at all stages of osteoblast differentiation from the proliferative through mineralization stages. TGF-β1 treatment of osteoblasts increased the expression and synthesis of the ECM components, collagen and fibronectin. When CTGF-specific siRNA was used to prevent TGF-β1 induction of CTGF expression, it also inhibited collagen and fibronectin production, thereby demonstrating the requirement of CTGF for their up-regulation. To examine the effects of TGF-β1 on osteoblast cell growth, cultures were treated with TGF-β1 during the proliferative stage. Cell number was significantly reduced and the cells exhibited a decrease in G1 cyclin expression, consistent with TGF-β1-induced cell-cycle arrest. Cultures transfected with CTGF siRNA prior to TGF-β1 treatment showed an even greater reduction in cell number, suggesting that TGF-β1-induced growth arrest is independent of CTGF in osteoblasts. Collectively, these data demonstrate for the first time that CTGF is an essential downstream mediator for TGF-β1-induced ECM production in osteoblasts, but these two growth factors function independently regarding their opposing effects on osteoblast proliferation. J. Cell. Physiol. 210: 843–852, 2007. © 2006 Wiley-Liss, Inc.