Osteoprogenitor cells in the human bone marrow stroma can be induced to differentiate into osteoblasts under stimulation with hormonal and local factors. We previously showed that human bone marrow stromal (HBMS) cells respond to dexamethasone and vitamin D by expressing several osteoblastic markers. In this study, we investigated the effects and interactions of local factors (BMP-2 and TGF- 2 ) on HBMS cell proliferation and differentiation in short-term and long-term cultures. We found that rhTGF- 2 increased DNA content and stimulated type I collagen synthesis, but inhibited ALP activity and mRNA levels, osteocalcin production, and mineralization of the matrix formed by HBMS cells. In contrast, rhBMP-2 increased ALP activity and mRNA levels, osteocalcin levels and calcium deposition in the extracellular matrix without affecting type I collagen synthesis and mRNA levels, showing that rhBMP-2 and rhTGF- 2 regulate differentially HBMS cells. Co-treatment with rhBMP-2 and rhTGF- 2 led to intermediate effects on HBMS cell proliferation and differentiation markers. rhTGF- 2 attenuated the stimulatory effect of rhBMP-2 on osteocalcin levels, and ALP activity and mRNA levels, whereas rhBMP-2 reduced the rhTGF- 2 -enhanced DNA synthesis and type I collagen synthesis. We also investigated the effects of sequential treatments with rhBMP-2 and rhTGF- 2 on HBMS cell differentiation in long-term culture. A transient (9 days) treatment with rhBMP-2 abolished the rhTGF- 2 response of HBMS cells on ALP activity. In contrast, a transient (10 days) treatment with rhTGF- 2 did not influence the subsequent rhBMP-2 action on HBMS cell differentiation. The data show that TGF- 2 acts by increasing HBMS cell proliferation and type I collagen synthesis whereas BMP-2 acts by promoting HBMS cell differentiation. These observations suggest that TGF- 2 and BMP-2 may act in a sequential manner at different stages to promote human bone marrow stromal cell differentiation towards the osteoblast phenotype.