Mutations in PHEX and DMP1 result in X-linked hypophosphatemic rickets (HYP) and autosomal-recessive hypophosphatemic-rickets (ARHR) respectively. Specific-binding of PHEX to MEPE regulates the release of small protease-resistant MEPE-peptides (ASARM-peptides). ASARM-peptides are potent inhibitors of mineralization (minhibins) that also occur in DMP1 (MEPE related SIBLING protein). It is not known whether these peptides are directly responsible for the mineralization defect. We therefore used a bone marrow stromal-cell (BMSC) coculture model, ASARM-peptides, anti-ASARM antibodies and a small synthetic PHEX-Peptide (SPR4; 4.2 kDa) to examine this. Surface plasmon resonance (SPR) and 2D ¹H/¹⁵N nuclear magnetic resonance demonstrated specific binding of SPR4-peptide to ASARM-peptide. When cultured individually for 21 days, HYP BMSCs displayed reduced mineralization compared with WT (-87%; p<0.05). When co-cultured, both HYP and WT cells failed to mineralize. However, co-cultures (HYP and WT) or monocultures of HYP BMSCs treated with SPR4-peptide or anti-ASARM neutralizing-antibodies mineralized normally. Wild-type BMSCs treated with ASARM-peptide also failed to mineralize properly without SPR4-peptide or anti-ASARM neutralizing antibodies. ASARM-peptide treatment decreased PHEX mRNA and protein (-80%; p<0.05) and SPR4-peptide co-treatment reversed this by binding ASARM-peptide. SPR4-peptide also reversed ASARM-peptide mediated changes in expression of key osteoclast and osteoblast differentiation genes. Western-blots of HYP calvariae and BMSCs revealed massive degradation of both MEPE and DMP1 protein compared to the WT. We conclude that degradation of MEPE and DMP-1 and release of ASARM-peptides are chiefly responsible for the HYP mineralization defect and changes in osteoblast-osteoclast differentiation.