Insulin-like growth factor-I (IGF-I) plays a key role in skeletal growth by stimulating bone cell replication and differentiation. We previously showed that prostaglandin E 2 (PGE 2 ) and other cAMP-activating agents enhanced IGF-I gene transcription in cultured primary rat osteoblasts through promoter 1, the major IGF-I promoter, and identified a short segment of the promoter, termed HS3D, that was essential for hormonal regulation of IGF-I gene expression. We now demonstrate that CCAAT/enhancer-binding protein (C/EBP) ␦ is a major component of a PGE 2 -stimulated DNA-protein complex involving HS3D and find that C/EBP␦ transactivates IGF-I promoter 1 through this site. Competition gel shift studies first indicated that a core C/EBP half-site (GCAAT) was required for binding of a labeled HS3D oligomer to osteoblast nuclear proteins. Southwestern blotting and UV-cross-linking studies showed that the HS3D probe recognized a ϳ 35-kDa nuclear protein, and antibody supershift assays indicated that C/EBP␦ comprised most of the PGE 2 -activated gel-shifted complex. C/EBP␦ was detected by Western immunoblotting in osteoblast nuclear extracts after treatment of cells with PGE 2 . An HS3D oligonucleotide competed effectively with a high affinity C/EBP site from the rat albumin gene for binding to osteoblast nuclear proteins. Cotransfection of osteoblast cell cultures with a C/EBP␦ expression plasmid enhanced basal and PGE 2 -activated IGF-I promoter 1-luciferase activity but did not stimulate a reporter gene lacking an HS3D site. By contrast, an expression plasmid for the related protein, C/EBP, did not alter basal IGF-I gene activity but did increase the response to PGE 2 . In osteoblasts and in COS-7 cells, C/EBP␦, but not C/EBP, transactivated a reporter gene containing four tandem copies of HS3D fused to a minimal promoter; neither transcription factor stimulated a gene with four copies of an HS3D mutant that was unable to bind osteoblast nuclear proteins. These results identify C/EBP␦ as a hormonally activated inducer of IGF-I gene transcription in osteoblasts and show that the HS3D element within IGF-I promoter 1 is a high affinity binding site for this protein.