The majority of breast cancers metastasizing to bone secrete parathyroid hormone-related protein (PTHrP). PTHrP induces local osteolysis that leads to activation of bone matrix-borne transforming growth factor beta (TGF beta). In turn, TGF beta stimulates PTHrP expression and, thereby, accelerates bone destruction. We studied the mechanism by which TGF beta activates PTHrP in invasive MDA-MB-231 breast cancer cells. We demonstrate that TGF beta 1 up-regulates specifically the level of PTHrP P3 promoter-derived RNA in an actinomycin D-sensitive fashion. Transient transfection studies revealed that TGF beta 1 and its effector Smad3 are able to activate the P3 promoter. This effect depended upon an AGAC box and a previously described Ets binding site. Addition of Ets1 greatly enhanced the Smad3/TGF beta-mediated activation. Ets2 had also some effect, whereas other Ets proteins, Elf-1, Ese-1, and Erf-1, failed to cooperate with Smad3. In comparison, Ets1 did not increase Smad3/TGF beta-induced stimulation of the TGF beta-responsive plasminogen activator inhibitor 1 (PAI-1) promoter. Smad3 and Smad4 were able to specifically interact with the PTHrP P3-AGAC box and to bind to the P3 promoter together with Ets1. Inhibition of endogenous Ets1 expression by calphostin C abrogated TGF beta-induced up-regulation of the P3 transcript, whereas it did not affect the TGF beta effect on PAI expression. In TGF beta receptor II- and Ets1-deficient, noninvasive MCF-7 breast cancer cells, TGF beta 1 neither influenced endogenous PTHrP expression nor stimulated the PTHrP P3 promoter. These data suggest that TGF beta activates PTHrP expression by specifically up-regulating transcription from the PTHrP P3 promoter through a novel Smad3/Ets1 synergism.