Pregnancy-associated plasma protein (PAPP)-A, a protease for IGF binding protein (IGFBP)-2, -4, and -5, may enhance IGF action by increasing its bioavailability. Here we have determined the role and mechanism of action of PAPP-A in the regulation of osteoblast proliferation in vitro and bone metabolism in vivo. Recombinant PAPP-A (100 ng/mL) significantly increased osteoblast proliferation and free IGF-I concentration. These effects were abolished by non-cleavable IGFBP-4 suggesting that PAPP-A promotes osteoblast proliferation by increasing IGF bioavailability. To determine if PAPP-A exerts anabolic effect on bone in vivo, we developed transgenic mice which overexpress PAPP-A in osteoblasts using the 2.3 kb rat type I collagen promoter. Consistent with the increase in IGFBP-4 proteolysis, free IGF-I concentration was significantly increased in the conditioned medium of cultured osteoblasts derived from transgenic mice compared with the wild-type littermates. Calvarial bone thickness, bone marrow cavity, and skull bone mineral density were significantly increased in transgenic mice. Bone size-related parameters in femur and tibia such as total bone area and periosteal circumference as determined by pQCT and histological analysis were significantly increased in transgenic mice. Bone formation rate and osteoid surface were increased by more than 2 fold, whereas bone resorbing surface was unaffected. These anabolic effects were sustained with aging. These findings provide strong evidence that PAPP-A acts as a potent anabolic factor in the regulation of bone formation. Thus, enhancing IGF bioavailability by PAPP-A can be a powerful strategy in the treatment of certain metabolic diseases such as osteoporosis.