Fetal rat calvaria cells plated at very low density generate discrete colonies, some of which are bone colonies (nodules) from individual osteoprogenitors that divide and differentiate. We have analyzed the relationship between cell proliferation and acquisition of tissue-specific differentiation markers in bone colonies followed individually from the original single cell to the fully mineralized state. The size distribution of fully formed nodules is unimodal, suggesting that the coupling between proliferation and differentiation of osteoprogenitor cells is governed by a stochastic element, but distributed around an optimum, corresponding to the peak colony size/division potential. Kinetic analysis of colony growth showed that osteoprogenitors undergo 9-10 population doublings before the appearance of the first morphologically differentiated osteoblasts in the developing colony. Double immunolabeling showed that these proliferating cells express a gradient of bone markers, from proliferative alkaline phosphatase-negative cells at the periphery of colonies, to postmitotic, osteocalcin-producing osteoblasts at the centers. An inverse relationship exists between cell division and expression of osteocalcin, the latter being restricted to late-stage, BrdU-negative osteoblasts, while the expression of all other markers is acquired before the cessation of proliferation, but not concomitantly. Bone sialoprotein expression is biphasic, detectable in some of the early, alkaline phosphatase-negative cells, and again later in both late preosteoblast (BrdU-positive) and osteoblast (BrdU-negative, osteocalcin-positive) cells. In late-stage, heavily mineralized nodules, staining for osteocalcin and bone sialoprotein is not detectable in the oldest/most mature cells. Our observations support the view that the bone nodule ''tissue-like'' structure, originating from a single osteoprogenitor and finally encompassing mineralized matrix production, recapitulates successive stages of the osteoblast differentiation pathway, in a proliferation/maturation sequence. Understanding the complexity of the proliferation/differentiation kinetics that occurs within bone nodules will aid in the qualitative and/or quantitative interpretation of tissue-specific marker expression during osteoblastic differentiation.