Cleidocranial dysplasia (CCD), an autosomal dominant human bone disease, is thought to be caused by heterozygous mutations in RUNX2/PEBP2alphaA/CBFA1. To understand the mechanism underlying the pathogenesis of CCD, we studied a novel mutant of RUNX2, namely CCDalphaA376, originally identified in a CCD patient. The nonsense mutation, which resulted in a truncated RUNX2 protein, severely impaired RUNX2 transactivation activity. We showed that signal transducers of transforming growth factor (TGF)-beta and bone morphogenetic protein (BMP) receptors, Smads, interact with RUNX2 in vivo and in vitro and enhance transactivation ability. The truncated RUNX2 protein failed to interact with Smads, and was unable to induce the osteoblast-like phenotype in C2C12 myoblasts following stimulation with BMP. Exogenous expression of Smads 1 and 4 in C2C12 cells stably expressing RUNX2 showed alkaline phosphatase (ALP) activity, suggesting a possible link between Smads and RUNX2, while in C2C12 stably expressing CCDalphaA376, a detectable level of ALP activity failed to be induced. The results suggest that CCDalphaA376 inhibited RUNX2 function in a dominant negative fashion.