A prime pathogenic agent associated with periodontitis is lipopolysaccharide (LPS) derived from Porphyromonas gingivalis. This study investigated the effects of P. gingivalis LPS on osteoblasts, which are responsible for alveolar bone repair. Bone cells were obtained from explants of rat alveolar bone chips and cultured with 0–200 ng ml−1 of P. gingivalis LPS. Porphyromonas gingivalis LPS significantly increased cell proliferation and inhibited osteoblast differentiation, as judged by reduced alkaline phosphatase activity. Analysis of biglycan mRNA and protein levels indicated that P. gingivalis LPS significantly delayed the normally high expression of biglycan during the early stages of culture, which are associated with cell proliferation and early differentiation of progenitor cells. In the presence of P. gingivalis LPS, decorin expression by the alveolar bone cells was reduced during periods of culture relating to collagen fibrillogenesis and mineral deposition. Analysis of glycosaminoglycan chains conjugated to these proteoglycans suggested that in the presence of P. gingivalis LPS, dermatan sulfate persisted within the matrix. This study suggests that P. gingivalis LPS influences the expression and processing of decorin and biglycan in the matrix, altering alveolar bone cell activity and osteoblast phenotype development. The consequences of this altered expression in relation to hindering bone repair as part of the cycle of events during periodontal disease are discussed.