LMP1 is an intracellular scaffold protein that contains a PDZ domain and three LIM domains. LMP1 has multiple functions including regulating mesenchymal stem cell (MSC) osteogenesis. Gene delivery of LMP1 induces bone formation in vivo in heterotopic and orthotopic sites. However, little is known about the physiological function and gene regulatory mechanisms of LMP1 in MSCs at the molecular level. Periodontal ligament (PDL) cells are a unique progenitor cell population that can differentiate into multiple cell types, including osteoblasts, adipocytes, or chondrocytes. This study sought to determine the physiological function and gene regulatory mechanisms of LMP1 in PDL cells at the molecular level. We show that LMP1 is upregulated in early stage of PDL cell osteogenic differentiation. Stable gene knockdown of LMP1 by shRNA inhibits DNA synthesis and corresponding cell proliferation in PDL cells, and further leads to decreased mineralization in vitro. Overexpression of LMP1 increases cell proliferation, and PDZ and ww-interacting domains are not sufficient to mediate this effect. Further, we found that in PDL cells, LMP1 is a downstream target gene of TGF-beta1 that is an early signal critical in preosteoblast proliferation and differentiation. TGF-beta1 stimulates PDL cell proliferation, however, this effect is compromised when LMP1 is knocked down. We further identified that the activation of TAK1-JNK/p38 kinase cascade is involved in the LMP1 gene regulation by TGF-beta1. We conclude that LMP1 is a downstream gene of TGF-beta1, involved in PDL cell proliferation. Our findings advance the understanding of the physiological function of LMP1 and define a regulatory mechanism of LMP1 in PDL progenitor cells and other MSCs.