Cells from fetal or neonatal skeleton can synthesize bone-like tissue in vitro. In contrast, formation of bone-like tissue in vitro by cells derived from adult animals has rarely been reported and has not been achieved using cells from bone marrow. We have explored development of bone-like tissue in vitro by bone marrow stromal cells. Marrow stromal cells obtained from 40-43-day-old Wistar rats were grown in primary culture for 7 days and then subcultured for 20-30 days. Cells were cultured in either alpha-minimal essential medium containing 15% fetal bovine serum, antibiotics, and 50 micrograms/ml ascorbic acid, or the above medium supplemented with either 10 mM Na-beta-glycerophosphate, 10(-8) M dexamethasone, or a combination of both. Cultures were examined using phase-contrast microscopy, undemineralized and demineralized tissue histology, histochemistry (for alkaline phosphatase activity), immunohistochemistry (for collagen type, osteonectin, and bone Gla-protein), scanning and transmission electron microscopy, energy dispersive X-ray microanalysis, and X-ray diffraction. Collagenous, mineralized nodules exhibiting morphological and ultrastructural characteristics similar to bone were formed in the cultures, but only in the presence of both beta-glycerophosphate and dexamethasone. Cells associated with the nodules exhibited alkaline phosphatase activity. The matrix of the nodules was composed predominantly of type-I collagen and both osteonectin and Gla-protein were present. X-ray microanalysis showed the presence of Ca and P, and X-ray diffraction indicated the mineral to be hydroxyapatite. The nodules were also examined for bone morphogenetic protein-like activity. Paired diffusion chambers containing partly demineralized nodules and fetal muscle were implanted intraperitonealy in rats. Induction of cartilage in relation to muscle was observed histologically after 40 days in the chambers. This finding provided further support for the bone-like nature of the nodules. The observations show that bone-like tissue can be synthesized in vitro by cells cultured from young-adult bone marrow, provided that the medium contains both beta-glycerophosphate and, particularly, dexamethasone.