Transforming growth factor beta (TGF beta) stimulates cell replication in fetal rat calvariae, and studies with isolated bone cells suggest that the primary mitogenically responsive cell is of the osteoblast lineage. The effect of TGF beta on bone cell replication is biphasic and depends on both the TGF beta concentration and cell density in monolayer culture. After 23 h of treatment, DNA synthesis in confluent cells is progressively enhanced by 0.15-15 ng/ml TGF beta; but in subconfluent cells, 15 ng/ml is less than maximal; and in sparse cell cultures, it is inhibitory. At all cell densities, however, 15 ng/ml TGF beta stimulates collagen synthesis, an effect which is more pronounced when DNA synthesis rates are declining. Furthermore, 1 mM hydroxyurea, which blocks the mitogenic effect of TGF beta by 85%, only minimally influences the increase in collagen synthesis. Cytoplasmic slot blot analysis reveals alterations in the amount of type I collagen mRNA in TGF beta-treated cells, suggesting that control is exerted, at least in part, at the transcriptional level. Since TGF beta is found in culture medium conditioned by bone explants and in bone tissue extracts, these results support that TGF beta is an important and multifunctional autocrine regulator of bone formation.