Background: This study was undertaken to examine the relationship between the tumor suppressor gene p53 and the nuclear signaling protein beta-catenin during bone differentiation. Cross talk between p53 and beta-catenin pathways has been demonstrated and is important during tumorigenesis and DNA damage, where deregulation of beta catenin activates p53. In this study, we used estrogen treatment of osteoblasts as a paradigm to study the relationship between the two proteins during osteoblast differentiation. Results: We exposed osteoblast-like ROS17/2.8 cells to 17-beta estradiol (E2), in a short term assay, and studied the cellular distribution and expression of beta-catenin. We found beta-catenin to be up regulated several fold following E2 treatment. Levels of p53 and its functional activity mirrored the quantitative changes seen in beta-catenin. Alkaline phosphatase, an early marker of osteoblast differentiation, was increased in a manner similar to beta-catenin and p53. In order to determine if there was a direct relationship between alkaline phosphatase expression and beta-catenin, we used two different approaches. In the first approach, treatment with LiCl, which is known to activate beta-catenin, caused a several fold increase in alkaline phosphatase activity. In the second approach, transient transfection of wild type beta-catenin into osteoblasts increased alkaline phosphatase activity two fold over basal levels, showing that beta catenin expression can directly affect alkaline phosphatase expression. However increase in beta catenin activity was not associated with an increase in its signaling activity through TCF/LEF mediated transcription. Immunofluorescence analyses of p53 and beta-catenin localization showed that E2 first caused an increase in cytosolic beta-catenin followed by the accumulation of beta-catenin in the nucleus. Nuclear p53 localization was detected in several cells. Expression of p53 was accompanied by distribution of beta-catenin to the cytoplasm and cell borders. A sub population of cells staining strongly for both proteins appeared to be apoptotic. Conclusion: These results suggest that interactions between p53 and beta-catenin signaling pathways may play a key role in osteoblast differentiation and maintenance of tissue homeostasis.