Melorheostosis is a rare bone disease characterized by linear hyperostosis and associated soft tissue abnormalities. The skin overlying the involved bone lesion is often tense, shiny, erythematous, and scleodermatous. In order to look for genes differentially expressed between the normal and involved skin, we cultured skin fibroblasts from the skin lesions of several afflicted patients, and identified differentially expressed genes by reverse dot-blot hybridization. We found that the genes human TGF-beta-induced gene product (betaig-h3), osteoblast-specific factor 2, osteonectin, fibronectin, and type I collagen were all downregulated in the affected skin fibroblasts, with betaig-h3 the most significantly affected. The expression of betaig-h3 was induced by TGF-beta in both affected and normal fibroblasts. In an effort to determine the mechanism of bone and skin abnormalities in melorheostosis, we made recombinant betaig-h3. Both immobilized and soluble recombinant betaig-h3 proteins with or without an RGD motif inhibited bone nodule formation of osteoblasts in vitro. Taken together, our results suggest that altered expression of several adhesion proteins may contribute to the development of hyperostosis and concomitant soft tissue abnormalities of melorheostosis, with betaig-h3 in particular playing an important role in osteogenesis.