Abstract Motivation: We propose a reverse engineering scheme to discover genetic regulation from genome-wide transcription data that monitors the dynamic transcriptional response after a change in cellular environment. The interaction network is estimated by solving a linear model using simultaneous shrinking of the least absolute weights and the prediction error. Results: The proposed scheme has been applied to the murine C2C12 cell-line stimulated to undergo osteoblast differentiation. Results show that our method discovers genetic interactions that display significant enrichment of co-citation in literature. More detailed study showed that the inferred network exhibits properties and hypotheses that are consistent with current biological knowledge. Availability: Software is freely available for academic use as a Matlab package called GENLAB: Contact: [email protected] Supplementary information: Additional data, results and figures can be found at