Enhanced osteoclast (OCL) activity plays a major role in the pathogenesis of osteoporosis, bone metastasis, and hypercalcemia of malignancy. Thus, identification and characterization of inhibitors of OCL activity should be clinically important. We have used an expression cloning approach to identify novel inhibitors of OCL activity that are produced by OCL and have recently identified, cloned, and produced in E. coli, osteoclast inhibitory peptide 1 (OIP-1), a factor that blocks both OCL formation and bone resorption. The factor is the human homologue of murine Sca1, a member of the Ly6 family of proteins that is expressed on hematopoietic precursors and also expressed by osteoblasts, but heretofore had no known effect on OCL activity. This factor represents a novel class of factors which inhibit OCL activity and that is both membrane-bound and also released from the cell. In this proposal, we will determine the mechanism of OCL inhibition by OIP-1/hSca1 by: (1) Assessing if the membrane-bound form as well as the extracellular form of OIP-1/hSca1 inhibits OCL formation. We will express a c-terminal truncation form of OIP-1/hSca1, label the soluble recombinant protein and determine if there is a target receptor by Scatchard binding analysis and cross-linking studies; (2) Examining the effects of E. coli-derived recombinant OIP-1/hSca1 on the growth and differentiation of the different stages of OCL development and determining the effect of OIP-1/hSca1 on OCL apoptosis; and (3) Testing OIP-1/hSca1 on OCL formation in vivo. As part of these studies, we will stably transfect Chinese Hamster Ovary (CHO) cells with an OIP-1/hSca1 cDNA expression construct and implant them into nude mice to assess the effects of continuous exposure of mammalian OIP-1/hSca1 on basal and IL-1 stimulated bone remodeling.