After demonstrating the presence of matrix vesicles in three osteosarcoma cell lines, MG-63, ROS 17/2.8 and MC-3T3-E1, we sought to determine whether two major enzymes localized to matrix vesicles, alkaline phosphatase and phospholipase A2, could be regulated by 1,25(OH)2D3 and/or TGF beta. Intravesicular calcification is probably dependent on these two enzymes. Alkaline phosphatase is essential for hydrolysis of phosphate-containing substrates and phospholipase A2 hydrolyzes diacylphosphatides in a calcium-mediated manner at lipid-aqueous interfaces leading to changes in membrane fluidity and possibly breakdown of the matrix vesicle. The 1,25(OH)2D3 induced increase of alkaline phosphatase in bone cells is localized to the matrix vesicle. TGF beta also increased alkaline phosphatase activity in two of the cell lines, MG-63 and ROS 17/2.8 but to a greater degree than 1,25(OH)2D3. Matrix vesicle alkaline phosphatase activity exhibited a greater response than that in the plasma membrane. TGF beta increased phospholipase A2 activity in both matrix vesicles and plasma membranes, therefore, no targeting was observed with respect to this enzyme. When TGF beta was combined with 1,25(OH)2D3, 1,25(OH)2D3 had no effect on phospholipase A2 and did not interfere with TGF beta stimulation of phospholipase A2 activity. When 1,25(OH)2D3 and TGF beta were combined, a tremendous synergy was observed in alkaline phosphatase specific activity in both plasma membranes and matrix vesicles with targeting to matrix vesicles. Therefore, TGF beta not only plays an important role in matrix formation and differentiation, but works in conjunction with 1,25(OH)2D3 to greatly potentiate the effects seen with 1,25(OH)2D3 alone.