Connective tissue growth factor (CTGF) is a secreted, extracellular matrix‐associated signaling protein that regulates diverse cellular functions. In vivo, CTGF is expressed in many tissues with highest levels in the kidney and brain. The purpose of this study was twofold; first, to localize CTGF in normal bone in vivo during growth and repair, and second, to examine CTGF expression and function in primary osteoblast cultures in vitro and test its effect on bone formation in vivo. Northern and Western blot analyses confirmed that CTGF is expressed in normal long bones during the period of growth or modeling. In situ hybridization and immunohistochemical analysis demonstrated intense staining for CTGF mRNA and protein in osteoblasts lining metaphyseal trabeculae. Examination of CTGF expression in the fracture callus demonstrated that it was primarily localized in osteoblasts lining active, osteogenic surfaces. In primary osteoblast cultures, CTGF mRNA levels demonstrated a bimodal pattern of expression, being high during the peak of the proliferative period, abating as the cells became confluent, and increasing to peak levels and remaining high during mineralization. This pattern suggests that CTGF may play a role in osteoblast proliferation and differentiation as previously demonstrated for fibroblasts and chondrocytes. Treatment of primary osteoblast cultures with anti‐CTGF neutralizing antibody caused a dose‐dependent inhibition of nodule formation and mineralization. Treatment of primary osteoblast cultures with recombinant CTGF (rCTGF) caused an increase in cell proliferation, alkaline phosphatase activity, and calcium deposition, thereby establishing a functional connection between CTGF and osteoblast differentiation. In vivo delivery of rCTGF into the femoral marrow cavity induced osteogenesis that was associated with increased angiogenesis. This study clearly shows that CTGF is important for osteoblast development and function both in vitro and in vivo. © 2003 Wiley‐Liss, Inc.