A number of clinical studies have demonstrated that norethisterone (NET), a potent synthetic progestin, restores postmenopausal bone loss, although its mode of action on bone cells is not fully understood, while the effect of naturally occurring progesterone in bone has remained controversial. A recent report claims that the potent effects of NET on osteoblastic cell proliferation and differentiation, mimicking the action of estrogens, are mediated by non-phenolic NET derivatives. To determine whether osteoblasts possess the enzymes required to bioconvert a progesterone receptor (PR) agonist into A-ring reduced metabolites with affinity to bind estrogen receptor (ER), we studied the in vitro metabolism of [3H]-labeled NET in cultured neonatal rat osteoblasts and the interaction of its metabolic conversion products with cytosolic –osteoblast ER, employing a competition analysis. Results indicated that NET was extensively bioconverted (36.4%) to 5α-reduced metabolites, including 5α-dihydro NET, 3α,5α-tetrahydro NET (3α,5α-NET) and 3β,5α-tetrahydro NET (3β,5α-NET), demonstrating the activities of 5α-steroid reductase and two enzymes of the aldo-keto reductases family. Expression of Srd5a1 in neonatal osteoblast was well demonstrated, whereas Srd5a2 expression was not detected. The most striking finding was that 3β,5α-NET and 3α,5α-NET were efficient competitors of [3H]-estradiol for osteoblast ER binding sites, exhibiting affinities similar to that of estradiol. The results support the concept that the interplay of 5α-steroid reductase and aldo-keto reductases in osteoblastic cells, acting as an intracrine modulator system is capable to bioconvert a PR agonist into ER agonists, offering an explanation of the molecular mechanisms NET uses to enhance osteoblastic cell activities.