The objective of this study was to examine in vitro the influence of recombinant human osteogenic protein-1 [rhOP-1, or bone morphogenetic protein-7 (BMP-7)] on cartilage formation by human and goat perichondrium tissue containing progenitor cells with chondrogenic potential. Fragments of outer ear perichondrium tissue were embedded in clotting autologous blood to which rhOP-1 had been added or not added (controls), and the resulting explant was cultured for 3 weeks without further addition of rhOP-1. Cartilage formation was monitored biochemically by measuring [35S]-sulphate incorporation into proteoglycans and histologically by monitoring the presence of metachromatic matrix with cells in nests. The presence of rhOP-1 in the explant at the beginning of culture stimulated [35S]-sulphate incorporation into proteoglycans in a dose-dependent manner after 3 weeks of culture. Maximal stimulation was reached at 40 microg/mL (human explants: +148%; goat explants: +116%). Histology revealed that explants treated with 20-200 microg/mL of rhOP-1, but not untreated control explants, contained areas of metachromatic-staining matrix with chondrocytes in cell nests. It was concluded that rhOP-1 stimulates differentiation of cartilage from perichondrium tissue. The direct actions of rhOP-1 on perichondrium cells in the stimulation of chondrocytic differentiation and production of cartilage matrix in vitro provides a cellular mechanism for the induction of cartilage formation by rhOP-1 in vivo. Thus rhOP-1 may promote early steps in the cascade of events leading to cartilage formation and could prove to be an interesting factor in the regeneration of cartilage in articular cartilage defects.