Vitamin D is an important regulator of mineral homeostasis and bone metabolism. 1 alpha-Hydroxylation of 25-(OH)D-3 to form the bioactive vitamin D hormone, 1 alpha, 25-(OH)(2)D-3, is classically considered to take place in the kidney. However, 1 alpha-hydroxylase has been reported at extrarenal sites. Whether bone is a 1 alpha,25-(OH)(2)D-3 synthesizing tissue is not univocal. The aim of this study was to investigate an autocrine/paracrine function for 1 alpha,25-(OH)(2)D-3 in bone. We show that 1 alpha-hydroxlase is expressed in human osteoblasts, as well as the vitamin D binding protein receptors megalin and cubilin. Functional analyses demonstrate that after incubation with the 1 alpha-hydoxylase substrate 25-(OH)D-3, the osteoblasts can produce sufficient 1 alpha,25-(OH)(2)D-3 to modulate osteoblast activity, resulting in induced alkaline phosphatase ( ALP) activity, osteocalcin (OC) and CYP24 mRNA expression, and mineralization. The classical renal regulators of 1-hydroxylase, parathyroid hormone, and ambient calcium do not regulate 1 alpha-hydroxylase in osteoblasts. In contrast, interleukin (IL)-1 alpha strongly induces 1 alpha-hydroxylase. Besides the bone-forming cells, we demonstrate 1 alpha-hydroxylase activity in the bone resorbing cells, the osteoclasts. This is strongly dependent on osteoclast inducer RANKL. This study showing expression, activity, and functionality of 1 alpha-hydoxylase unequivocally demonstrates that vitamin D can act in an auto/paracrine manner in bone.