Osteoblastic differentiation is an essential part of bone formation that compensates resorbed bone matrix to maintain its structural integrity. Cells in an osteoblast lineage develop differentiated phenotypes during a long-term culture in vitro. However, intrinsic mechanisms whereby these cells differentiate into mature osteoblasts are yet unclear. Bone morphogenetic proteins (BMPs) stimulate osteoblastic differentiation and bone formation. We demonstrate that mouse osteoblastic MC3T3-E 1 cells constitutively expressed messenger RNAs (mRNAs) for BMP-2 and BMP-4 and accumulated BMPs in collagen-rich extracellular matrices. BMPs associated with the extracellular matrices were involved in the induction of osteoblastic differentiation of nonosteogenic mesenchymal cells as well as cells in the osteoblast lineage. MC3T3-E1 cells constitutively expressed type IA and type II BMP receptors. When a kinase-deficient type IA BMP receptor was stably transfected to MC3T3-E 1 cells to obliterate BMP-2/4 signaling, these cells not only failed to respond to exogenous BMP-2 but lost their capability of differentiation into osteoblasts that form mineralized nodules. These observations strongly suggest that endogenous BMP-2/4 accumulated in extracellular matrices are essential for the osteoblastic differentiation of cells in the osteoblast lineage. Therefore, the regulatory mechanism of BMP-2/4 actions in osteoblastic cells is a principal issue to be elucidated for better understanding of pathogenesis of bone losing diseases such as osteoporosis.