The secretion of fibronectin by differentiating osteoblasts and its accumulation at sites of osteogenesis suggest that fibronectin participates in bone formation. To test this directly, we determined whether fibronectin-cell interactions regulate progressive differentiation of cultured fetal rat calvarial osteoblasts. Spatial distributions of alpha 5 integrin subunit, fibronectin, osteopontin (bone sialoprotein I) and osteocalcin (bone Gla-protein) were similar in fetal rat calvaria and mineralized, bone-like nodules formed by cultured osteoblasts. Addition of anti-fibronectin antibodies to cultures at confluence reduced subsequent formation of nodules to less than 10% of control values, showing that fibronectin is required for normal nodule morphogenesis. Anti-fibronectin antibodies selectively inhibited steady-state expression of mRNA for genes associated with osteoblast differentiation; mRNA levels for alkaline phosphatase and osteocalcin were suppressed, whereas fibronectin, type I collagen and osteopontin were unaffected. To identify functionally relevant domains of fibronectin, we treated cells with soluble fibronectin fragments and peptides. Cell-binding fibronectin fragments (type III repeats 6–10) containing the Arg-Gly-Asp (RGD) sequence blocked both nodule initiation and maturation, whether or not they contained a functional synergy site. In contrast, addition of the RGD-containing peptide GRGDSPK alone did not inhibit nodule initiation, although it did block nodule maturation. Thus, in addition to the RGD sequence, other features of the large cell-binding fragments contribute to the full osteogenic effects of fibronectin. Nodule formation and osteoblast differentiation resumed after anti-fibronectin antibodies or GRGDSPK peptides were omitted from the media, showing that the inhibition was reversible and the treatments were not cytotoxic. Outside the central cell-binding domain, peptides from the IIICS region and antibodies to the N terminus did not inhibit nodule formation. We conclude that osteoblasts interact with the central cell-binding domain of endogenously produced fibronectin during early stages of differentiation, and that these interactions regulate both normal morphogenesis and gene expression.