In previous studies, we developed mouse genetic models and discovered genetic components of quantitative trait loci on mouse chromosomes that contribute to phenotypes such as bone size, bone density, and fracture healing. However, these regions contain dozens of genes in several overlapping bacterial artificial chromosomes (BACs) and are difficult to clone by physical cloning strategies. A feasible and efficient approach of identifying candidate genes is to transfer the genomic loci in BAC clones into mammalian cells for functional studies. In this study, we retrofitted a BAC construct into herpes simplex virus-1 amplicon and packaged it into an infectious BAC (iBAC) to test gene function in a cell-based system, using a 128-kb clone containing the complete bone morphogenetic protein-2 (BMP-2) gene. We transduced MC3T3-E1 cells with the iBAC bearing BMP-2 gene and examined transgene expression and function. Our results have demonstrated that an iBAC can efficiently deliver a BMP-2 genomic locus into preosteoblast cells and express functional BMP-2 protein, inducing a phenotype of cell differentiation, as indicated by an increase in alkaline phosphatase activity. Therefore, this experimental system provides a rapid, efficient cell-based model of high-throughput phenotypic screening to identify the BAC clones from physically mapped regions that are important for osteoblast differentiation. It also illustrates the potential of iBAC technology in functional testing of single nucleotide polymorphisms located in the distal promoter or/and intron regions responsible for low bone density. (C) 2004 Elsevier Inc. All rights reserved.