Transforming growth factor beta-1 (TGF-β1) is released from the extracellular matrix of rat growth plate chondrocytes and activated by stromelysin-1 (matrix metalloproteinase 3, MMP-3), an enzyme that is stored in matrix vesicles. MMP-3 is released from these extracellular organelles by the direct action of 1α,25(OH) 2D 3 via activation of phospholipase A 2 (PLA 2), resulting in local production of lysophospholipids and matrix vesicle membrane destabilization. This effect of 1α,25(OH) 2D 3 is greater in matrix vesicles from growth zone chondrocyte cultures and PLA 2 activity is higher in the growth zone in vivo, suggesting that it may depend on chondrocyte maturation state in the endochondral lineage. Previous studies have shown that latent TGF-β1 can be activated by mild detergents in vitro, suggesting that lysophospholipids may act in vivo in a similar manner. To test this hypothesis, we determined if rat costochondral growth plate cartilage cells produce lysophosphatidylcholine (LPC) and lysophosphatidylethanolamine (LPE) in a maturation state-dependent manner and if LPC or LPE could release and activate latent TGF-β1 from the extracellular matrix produced by these cells. Rat growth plate chondrocytes produced both lysophospholipids, with growth zone cells producing higher levels of LPE via PLA 1, and resting zone cells producing higher levels of LPC via PLA 2. LPC and LPE directly increased activation of recombinant human latent TGF-β1 in a biphasic manner with a peak at 2 μg/ml. Phosphatidylcholine, phosphatidylethanolamine, and LPE plasmalogen (LPEP), but not choline, also activated TGF-β1. Latent TGF-β1 incubated with LPC or LPE, but neither lysophospholipid alone, stimulated [ 3H]-thymidine incorporation of resting zone cells, indicating the TGF-β1 released was biologically active. LPC and LPE also released TGF-β1 in a dose- and time-dependent manner when incubated with cell-free extracellular matrices produced by the cells. These results indicate that LPC and LPE have important roles as regulators of rat growth plate chondrocytes by directly and indirectly activating TGF-β1 stored in the extracellular matrix.