Fibroblast growth factors (FGF) are osteoblast mitogens, but their effects on bone formation are not clearly understood. Most in vitro studies examining the effects of FGFs on osteoblasts have been performed only during the initial proliferative stage of osteoblast culture. In these studies, we examined the consequential effect of acidic FGF in cultures of rat fetal diploid osteoblasts that undergo a developmental differentiation program producing a mineralized bone-like matrix. During the initial growth period (days 1-10), addition of acidic FGF (100 micrograms/ml) to actively proliferating cells increased (P < 0.05) 3H-thymidine uptake (2,515 +/- 137, mean +/- SEM vs. 5,884 +/- 818 cpm/10(4) cells). During the second stage of maturation (days 10-15), osteoblasts form multilayered nodules of cells and accumulate matrix, followed by mineralization (stage 3, days 16-29). Addition of acidic FGF to the osteoblast cultures from days 7 to 15 completely blocked nodule formation. Furthermore, addition of acidic FGF after nodule formation (days 14-29) inhibited matrix mineralization, which was associated with a marked increase in collagenase gene expression, and resulted in a progressive change in the morphology of the nodules, with only a few remnants of nonmineralized nodules present by day 29. Histochemical and biochemical analyses revealed a decrease in alkaline phosphatase and mineral content, confirming the acidic FGF-induced inhibition of nodule and matrix formation. To identify mechanisms contributing to these changes, we examined expression of cell growth and bone phenotypic markers. Addition of acidic FGF during the proliferative phase (days 7-8) enhanced histone H4, osteopontin, type I collagen, and TGF-beta mRNA levels, which are coupled to proliferating osteoblasts, and blocked the normal developmental increase in alkaline phosphatase and osteocalcin gene expression and calcium accumulation. Addition of acidic FGF to the cultures during matrix maturation (days 14-15) reactivated H4, osteopontin, type I collagen, and TGF-beta gene expression, and decreased alkaline phosphatase and osteocalcin gene expression. In an in vivo experiment, rats were treated with up to 60 micrograms/kg/day acidic FGF intravenously for 30 days. Proliferation of osteoblasts and deposition of bone occurred in the marrow space of the diaphysis of the femur in a dose-related fashion. The metaphyseal areas were unaffected by treatment. In conclusion, our data suggest that acidic FGF is a potent mitogen for early stage osteoblasts which leads to modifications in the formation of the extracellular matrix; increases in TGF-beta and collagenase are functionally implicated in abrogating competency for nodule formation. Persistence of proliferation prevented expression of alkaline phosphatase and osteocalcin, also contributing to the block in the progression of the osteoblast developmental sequence.