We examined the distribution of insulin-like growth factor binding proteins (IGFBPs) in cultured neonatal mouse calvariae. IGFBP-3 and -4 were predominantly found in the conditioned medium. IGFBP-2 was partitioned between conditioned medium and bone and extracellular matrix (BECM), while intact (31-kDa) IGFBP-5 was most abundant in BECM extracts. After treatment with parathyroid hormone (PTH, 10(-8) M) or prostaglandin E2 (PGE2, 10(-6) M), immunoreactive IGFBP-5 accumulated in the conditioned medium in a 21-kDa form which did not bind IGF-I on Western ligand blots. PTH and PGE2 did not alter the level of steady-state IGFBP-5 mRNA, nor markedly stimulate IGFBP-5 synthesis in the calvariae, and thus accumulation of 21-kDa IGFBP-5 was largely due to release from BECM. This accumulation of truncated IGFBP-5 in the conditioned medium was not dependent on osteoclastic bone resorption, since it was not blocked by calcitonin or a bisphosphonate which inhibited PTH- and PGE2-stimulated 45Ca-release. The conditioned medium from PTH- or PGE2-treated cultures degraded recombinant human IGFBP-5 into lower molecular weight fragments. Addition of IGF-1 at 10(-8) M into the culture resulted in accumulation of native 31-kDa IGFBP-5. However, even in the presence of IGF-1, the native IGFBP-5 was degraded and the 21-kDa product accumulated in the culture medium. These results suggested a possible proteolytic mechanism for 21-kDa IGFBP-5 accumulation, responsive to PTH and PGE2. Aprotinin, leupeptin, cystatin, and bestatin did not inhibit the effects of PTH and PGE2 in the cultures. The localization of IGFBP-5 in BECM and its release and proteolysis induced by PTH and PGE2 could play a role in the local regulation of bone metabolism.