Osteoarthritis (OA), the most prevalent form of skeletal disease, represents a leading cause of disability following middle age. OA is characterized by the loss of articular cartilage; however, the details of its etiology and pathogenesis remain unclear. Recently, we demonstrated a genetic association between the cartilage extracellular matrix protein asporin and OA (Kizawa, H., Kou, I., Iida, A., Sudo, A., Miyamoto, Y., Fukuda, A., Mabuchi, A., Kotani, A., Kawakami, A., Yamamoto, S., Uchida, A., Nakamura, K., Notoya, K., Nakamura, Y., and Ikegawa, S. (2005) Nat. Genet. 37, 138-144). Furthermore, we showed that asporin binds to transforming growth factor-beta (TGF-beta), a key cytokine in OA pathogenesis, and inhibits TGF-beta-induced chondrogenesis. To date, functional data for asporin have come primarily from mouse cell culture models of developing cartilage rather than from human articular cartilage cells, in which OA occurs. Here, we describe mechanisms for asporin function and regulation in human articular cartilage. Asporin blocks chondrogenesis and inhibits TGF-beta1-induced expression of matrix genes and the resulting chondrocyte phenotypes. Small interfering RNA-mediated knockdown of asporin increases the expression of cartilage marker genes and TGF-beta1; in turn, TGF-beta1 stimulates asporin expression in articular cartilage cells, suggesting that asporin and TGF-beta1 form a regulatory feedback loop. Asporin inhibits TGF-beta/Smad signaling upstream of TGF-beta type I receptor activation in vivo by co-localizing with TGF-beta1 on the cell surface and blocking its interaction with the TGF-beta type II receptor. Our results provide a basis for elucidating the role of asporin in the molecular pathogenesis of OA.