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Costunolide is a sesquiterpene lactones used in many herbal medicines, with well-established anti-inflammatory and anti-oxidant functions modulating endoplasmic reticulum (ER) stress pathways, and which promotes the expression of anti-oxidant genes. The aim of this study is to investigate whether costunolide is involved in osteoblast differentiation and, determine the mechanisms of differentiation in mesenchymal stem cells.The cytotoxicity of costunolide was identified using the 3-(4,5-dimethylthiazol-2-yl)-2,5-diphenyltetrazolium bromide (MTT) assay. The mRNA and protein expression levels of osteogenic genes were determined by RT-PCR and Western blot analysis. Alkaline phosphate (ALP) staining and Alizarin red S (ARS) staining were performed to evaluate ALP activity and matrix mineralization. Transcriptional activity was detected using a luciferase reporter assay.In this study, we determined that costunolide increased the expression of distal-less homeobox 5 (Dlx5), runt-related transcription factor 2 (Runx2), ALP, and osteocalcin (OC) in C3H10T 1/2 cells. Furthermore, costunolide increased ALP activity and matrix mineralization. Interestingly, costunolide increased ER stress by Bip, activating transcription factor 4 (ATF4) and C/EBP homologous protein (CHOP). However, it did not exert effects on expression of activating transcription factor 6 (ATF6). ATF4 activation has a protective role in oxidative stress, and its transcription induces anti-oxidant genes in cells. Heme oxygenase-1 (HO-1) is a major anti-oxidant enzyme, and is regulated by ATF4. We showed that costunolide treatment increased HO-1 expression. Furthermore, the HO-1 inhibitor, Sn(IV) Protoporphyrin IX dichloride (SnPP) was blocked costunolide-induced Runx2 expression.Our results revealed that costunolide-induced osteoblast differentiation is regulated by ATF4-dependent HO-1 expression.