Marrow stromal cells (MSCs) are obtained in increased number from mice in which the thrombospondin 2 (TSP2) gene is disrupted, and these cells show increased DNA synthesis in vitro. To examine more closely the role of TSP2 in the physiology and osteogenic differentiation of MSCs, an in-depth characterization of TSP2-null MSCs was conducted. Determination of TSP2 protein content by Western analysis and RNA levels by reverse-transcription polymerase chain reaction (RT-PCR) indicated that MSCs are the primary source of TSP2 in the marrow and secrete abundant TSP2 into culture medium. Morphologically, the TSP2-null and wild-type (WT) cell populations were similar and by flow cytometry contained equivalent numbers of CD44+, Mac1+, intercellular adhesion molecule-1 (ICAM-1+), and ScaI+ cells. TSP2-null cells showed delayed mineralization associated with an increased rate of proliferation. Consistent with this finding, there was a decrease in expression of collagen and osteocalcin RNA by TSP2-null MSCs on day 7 and increased osteopontin expression on day 7 and day 14. In add-back experiments, recombinant TSP2 produced a dose-dependent decrease in proliferation. This reduction was associated with an accumulation of TSP2-treated cells in the G1 phase of the cell cycle and did not result from an increase in apoptosis. When TSP2 treatment was terminated, the cell population reentered the S phase. We conclude that the increased endosteal bone formation observed in TSP2-null mice results primarily from the failure of TSP2 to regulate locally MSC cell cycle progression.