Ch21, a developmentally regulated extracellular protein expressed in chick embryos and in cultured chondrocytes, was expressed in the baculovirus system, and the recombinant protein was purified to homogeneity by gel-filtration chromatography. Separation of two isoforms was achieved on an ion-exchange column. Previous work had shown that Ch21 belongs to the superfamily of lipocalins, which are transport proteins for small hydrophobic molecules. Studies were performed to identify the Ch21 ligand.By analysis of recombinant Ch21 on native polyacrylamide gel electrophoresis and by Lipidex assay, the binding of fatty acid to the protein was shown and a preferential binding of long-chain unsaturated fatty acids was observed. Both isoforms had the same behavior. Ch21, also present in chicken serum, represents the first extracellular protein able to selectively bind and transport fatty acid in extracellular fluids and serum. We propose to rename the Ch21 protein as extracellular fatty acid-binding protein (Ex-FABP).In the last several years, our laboratory has focused on the cellular and molecular mechanisms that control endochondral bone formation. The process is characterized by the differentiation of prechondrogenic mesenchymal cells to resting, proliferating, and hypertrophic chondrocytes (1-8) and then by the replacement of hypertrophic cartilage by bone, i.e. cartilage calcification, erosion, invasion by blood vessels, and onset of osteogenesis. Hypertrophic chondrocytes play a critical role in the last part of the process. In fact they can undergo further differentiation to osteoblast-like cells both in vitro (9) and, in selected bone regions, in vivo (10 -14) and are essential to the deposition of the first bone on newly synthesized bone sialoprotein-rich matrix ("bone priming").