Osteoblastic differentiation was studied in vitro using primary cultures of bone cells derived from neonatal mouse calvaria. Using alkaline phosphatase as a marker, maintenance of the osteoblastic phenotype was found to be dependent upon the presence of ascorbic acid. No toxic effect due to ascorbic acid was seen. Insulin and dexamethasone were found to stimulate alkaline phosphatase expression, the former only in the absence of ascorbic acid. Two growth factors, epidermal growth factor and platelet-derived growth factor, were found to inhibit alkaline phosphatase expression in the presence of ascorbic acid. Osteogenesis was most pronounced in cultures supplemented with ascorbic acid. The osteoblasts formed multilayers of cells and secreted an organic extracellular matrix composed mainly of type I collagen. Matrix vesicles were found among the collagen fibres. In the presence of 6-glycerophosphate, calcium phosphate crystals were deposited in discrete patches forming a mineralisation front which progressively engulfed osteoblasts. The type of matrix formed and the pattern of mineralisation resembled those of lamellar bone. Insulin at 5000ng/ml stimulated matrix calcification in the absence of ascorbic acid. Dexamethasone, EGF and PDGF inhibited calcification. The extent of calcification was dependent upon the concentration of glycerophosphate in the culture medium. Conditioned medium from osteogenic cultures contained a GM-CSF which was secreted constitutively by the osteoblasts. Preliminary experiments with a mesenchymal stem cell line, Balb/c 3T3, showed the existence of a factor(s) with mitogenic activity in bone cell conditioned medium. No inducer of osteogenic differentiation was found.