Fetal rat calvarial-derived osteoblasts in vitro (ROB) reinitiate a developmental program from growth to differentiation concomitant with production of a bone tissue-like organized extracellular matrix. To identify novel genes which may mediate this sequence, we isolated total RNA from three stages of the cellular differentiation process (proliferation, extracellular matrix maturation, and mineralization), for screening gene expression by the differential mRNA display technique. Of 15 differentially displayed bands that were analyzed by Northern blot analysis, one prominent 310 nucleotide band was confirmed to be proliferation-stage specific. Northern blot analysis showed a 600-650 nt transcript which was highly expressed in proliferating cells and decreased to trace levels after confluency and throughout the differentiation process. We have designated this transcript PROM-1 (for proliferating cell marker). A full length PROM-1 cDNA of 607 bp was obtained by 58 RACE. A short open reading frame encoded a putative 37 amino acid peptide with no significant similarity to known sequences. Expression of PROM-1 in the ROS 17/2.8 osteosarcoma cell line was several fold greater than in normal diploid cells and was not downregulated when ROS 17/2.8 cells reached confluency. The relationship of PROM-1 expression to cell growth was also observed in diploid fetal rat lung fibroblasts. Hydroxyurea treatment of proliferating osteoblasts blocked PROM-1 expression; however, its expression was not cell cycle regulated. Upregulation of PROM-1 in response to TGF-b paralleled the stimulatory effects on growth as quantitated by histone gene expression. In conclusion, PROM-1 represents a small cytoplasmic polyA containing RNA whose expression is restricted to the exponential growth period of normal diploid cells; the gene appears to be deregulated in tumor derived cell lines.