Bone marrow stroma contains multipotential mesenchymal progenitor cells which can differentiate into osteoblastic cells; we refer to these cells as mesenchymal stem cells (MSCs). Basic fibroblast growth factor (bFGF) and bone morphogenetic protein-2 (BMP-2) have been implicated in the osteogenic regulatory process by virtue of their mitogenic and differentiation activities, respectively. This study examines and compares the effects of bFGF and BMP-2 on dexamethasone (Dex)-dependent in vitro osteogenic differentiation of rat marrow-derived MSCs. A 6-day exposure to bFGF markedly stimulated cell growth and induced osteoblastic differentiation as shown by osteocalcin mRNA expression (day 14), bone nodule formation (day 18), and calcium deposition (day 18). These results indicate that bFGF enhances both mitogenic activity and osteogenic development of Dex-treated marrow MSCs. In contrast, BMP-2 did not induce osteogenesis as strongly as bFGF. Thus, exposure to BMP-2 slightly increased bone nodule number and calcium content compared with the control. Exposure of MSCs to both BMP-2 and bFGF induced expression of osteocalcin mRNA and mineralizing bone-like nodules as early as day 11 and resulted in enhancement of bone formation more markedly than either factor alone. Consistent with these results, porous calcium phosphate ceramic cubes implanted in vivo, which were loaded with MSCs pre-exposed to both bFGF and BMP-2, showed higher histologic score for bone formation than those with MSCs pre-exposed to either bFGF or BMP-2 alone. These data indicate that combined treatment with bFGF and BMP-2 synergistically enhances the osteogenic potency of bFGF in rat marrow MSC culture.