LIM mineralization protein (LMP) is a novel positive regulator of the osteoblast differentiation program. In humans, three different LMP splice variants have been identified: LMP-1, LMP-2, and LMP-3. Gene transfer of human LMP-1 (hLMP-1) induces expression of genes involved in bone formation, including certain bone morphogenetic proteins (BMPs), promotes bone nodule formation in vitro, ectopic bone formation in vivo, and is therapeutic in animal models of posterior thoracic and lumbar spine fusion. To examine the osteoinductive properties of the LMP-3 in vitro and in vivo, we have generated plasmid and adenoviral vectors expressing codon-optimized hLMP-3. Here we demonstrate that gene transfer of hLMP-3 induces expression of the bone-specific genes osteocalcin, osteopontin, and bone sialoprotein and induced bone mineralization in preosteoblastic and fibroblastic cells. We also demonstrate that hLMP-3 is able to induce bone mineralization and the expression of the bone-specific genes, BMP-2, OSX, RunX2, and alkaline phosphatase in human mesenchymal stem cells in a dose-dependent manner. Finally, we demonstrate that direct gene transfer of hLMP-3 into murine skeletal muscle results in ectopic bone formation more efficiently than BMP-2. These results demonstrate that hLMP-3 gene transfer can be used to promote bone formation in cell culture and in vivo as or more efficiently than BMP-2, thus establishing feasibility and efficacy of direct gene delivery of hLMP-3 to produce bone in vivo. These results suggest that gene transfer of hLMP-3 could be developed as a bone-inductive therapeutic agent for clinical applications.