To better understand the molecular pathogenesis of OPLL (ossification of the posterior longitudinal ligament) of the spine, an ectopic bone formation disease, we performed cDNA microarray analysis on cultured ligament cells from OPLL patients. We found that TSG-6 (tumour necrosis factor alpha-stimulated gene-6) is down-regulated during osteoblastic differentiation. Adenovirus vector-mediated overexpression of TSG-6 inhibited osteoblastic differentiation of human mesenchymal stem cells induced by BMP (bone morphogenetic protein)-2 or OS (osteogenic differentiation medium). TSG-6 suppressed phosphorylation and nuclear accumulation of Smad 1/5 induced by BMP-2, probably by inhibiting binding of the ligand to the receptor, since interaction between TSG-6 and BMP-2 was observed in vitro. TSG-6 has two functional domains, a Link domain (a hyaluronan binding domain) and a CUB domain implicated in protein interaction. The inhibitory effect on osteoblastic differentiation was completely lost with exogenously added Link domain-truncated TSG-6, while partial inhibition was retained by the CUB domain-truncated protein. In addition, the inhibitory action of TSG-6 and the in vitro interaction of TSG-6 with BMP-2 were abolished by the addition of hyaluronan. Thus, TSG-6, identified as a down-regulated gene during osteoblastic differentiation, suppresses osteoblastic differentiation induced by both BMP-2 and OS and is a plausible target for therapeutic intervention in OPLL.