Osterix (Osx), a BMP-2-regulated transcription factor, controls expression of genes essential for osteoblast differentiation. Using progressive deletion of the Osx promoter, we characterized a Smad binding element (SBE) between -552 and -839 bp from its transcription start site. Electrophoretic mobility shift assay and chromatin immunoprecipitation assay showed binding and in vivo recruitment of Smads 1 and 5 to the Osx SBE. Inactivation of PI 3-kinase by the pharmacologic inhibitor Ly294002 or by dominant negative (DN) enzyme significantly blocked BMP-2-induced Osx protein and mRNA expression and Osx transcription. Finally, both DN PI 3-kinase and DN Akt significantly attenuated Smad 5-dependent transcription of Osx, demonstrating the first evidence for a concerted action of PI 3-kinase/Akt signaling with BMP-specific Smads for expression of Osx.