Isoform 1 or the secreted form is a binding and antagonizing protein for members of the TGF-beta family, such us activin, BMP2 and MSTN. Inhibits activin A-, activin B-, BMP2- and MSDT-induced cellular signaling; more effective on activin A than on activin B. Involved in bone formation; inhibits osteoclast differentiationc. Involved in hematopoiesis; involved in differentiation of hemopoietic progenitor cells, increases hematopoietic cell adhesion to fibronectin and seems to contribute to the adhesion of hematopoietic precursor cells to the bone marrow stroma. Isoform 2 or the nuclear form is probably involved in transcriptional regulation via interaction with MLLT10. Interacts with INHBA and INHBB. Interacts with FN1. Interacts with ADAM12. Isoform 2 interacts with MLLT10; the interaction enhances MLLT10 in vitro transcriptional activity and self-association. Interacts with MSTN. Although alternative initiation has been demonstrated and resulted in different localization, the major source of nuclear FSTL3 appears not to depend on translation initiation at Met-27 according to. Expressed in a wide range of tissues. A chromosomal aberration involving FSTL3 is found in a case of B-cell chronic lymphocytic leukemia. Translocation t(11;19)(q13;p13) with CCDN1.