The effects of transforming growth factor-beta (TGF-beta) on proteoglycan synthesis of chondrocytes are controversial. The hypothesis that the differential effect of TGF-beta is related to the differentiation stage of the chondrocytes is investigated in this study. Rabbit auricular chondrocytes were cultured in alginate. When seeded in alginate immediately after isolation, cells keep their cartilaginous phenotype. When cells are first cultured in monolayer, they lose their cartilaginous phenotype and become dedifferentiated. We used three different cell populations: (1) Differentiated cells (P0: immediately after isolation); (2) partially (de)differentiated cells (P1: after one passage in monolayer); (3) dedifferentiated cells (P4: after four passages in monolayer). Cells were characterized by morphology using electron microscopy, amount of proteoglycans using the Farndale assay and type of collagen produced using immunohistochemistry. The effects of addition of 10 ng/ml TGF-beta2 for 7 days to P0, P1 and P4 cells were compared. TGF-beta was added either directly from the start of the alginate culture, or after a preculture period of three weeks in alginate. The amount of proteoglycans was increased in all chondrocyte populations when TGF-beta was added immediately after seeding in alginate, indicating that the effect of TGF-beta on proteoglycan synthesis does not depend on the differentiation stage of cells. After preculture in alginate, stimulation of proteoglycan synthesis (as measured by amount of proteoglycans and 35S-sulfate incorporation) had vanished. This effect was independent of differentiation stage . A dose-response experiment with TGF-beta (1, 10, 50 ng/ml) confirmed this differentiation-stage-independent effect of TGF-beta on proteoglycan synthesis. Stimulation by TGF-beta can be retained after enzymatic digestion of the pericellular matrix and reseeding of the cells in alginate, indicating the importance of pericellular matrix for the effect of TGF-beta on matrix synthesis. Alkaline phosphatase (ALP) activity was largely inhibited by TGF-beta in P0 chondrocytes, either with or without preculture in alginate. After culturing in monolayer, ALP activity was not substantially changed by TGF-beta. This indicates that the effect of TGF-beta on ALP activity, in contrast to the effect on proteoglycan synthesis, does depend on the differentiation stage of the cells. Furthermore, the fact that ALP synthesis in P0 cells is still inhibited by TGF-beta after preculture indicates that these cells remain responsive to TGF-beta. This provides additional evidence for the importance of the pericellular matrix for regulation of the effect of TGF-beta on proteoglycan synthesis. The results indicate that, in pathological cartilage, matrix depletion might be the trigger for increased matrix synthesis in reaction to TGF-beta, suggesting an important role for TGF-beta in cartilage repair.