Bone morphogenetic proteins (BMPs) induce cartilage and bone formation at both bony and non-bony sites. We examined the possibility whether BMP-2 induces differentiation of osteoblast progenitors into chondroblast lineage cells using organ culture and cell culture prepared from the calvaria of newborn mouse. BMP-2 stimulated alkaline phosphatase activity (a marker of osteoblasts) and induced positive alcian blue staining (a marker of chondroblasts) in a dose- and time-dependent manner in cell cultures isolated from the whole calvaria. BMP-2 also increased the number of round-shaped cells in the cell cultures, which expressed type II collagen. Histologically, the calvaria consisted of not only bone, but also cartilaginous tissues stained with alcian blue, which were located along the endocranial surface of the parietal and occipital bones. When the calvariae were organ-cultured in the presence of BMP-2, the territory of the cartilaginous tissue was markedly increased, and covered most of the occipital bone. A histological examination of the cultured calvariae showed that the bony region of the occipital bone remained unchanged, while the cartilaginous region expanded independent of the bony region. BMP-2 increased the number of proliferating chondroblasts only in the cartilaginous tissue, but never induced new cartilage formation at the bony site. We obtained cells from the anterior portion that contained no cartilage and the posterior portion which contained cartilage, and we subsequently cultured them separately. BMP-2 stimulated ALP activity in all the cultures. However, the treatment with BMP-2 increased the intensity of alcian blue staining only in tissue culture of the posterior portion, but never induced alcian blue staining in tissue culture of the anterior portion. These results indicate that the chondrocytes induced by BMP-2 were derived from the cartilaginous tissue, which had already formed at the surface of the calvarial bone. BMP-2 did not induce differentiation of committed osteoblast progenitors into chondroblast lineage cells.