Demineralized bone matrix contains a number of growth factors for osteoblast-like cells. Two of these, the novel glycoprotein osteoinductive factor (OIF) and transforming growth factor-beta (TGF beta), act together to cause ectopic bone formation in vivo. Since OIF, like TGF beta, is likely released from bone when the matrix is resorbed, we examined the effects of homogeneous OIF and TGF beta on osteoclast function. Osteoclast function was tested in isolated avian osteoclasts and was measured in terms of tartrate-resistant acid phosphatase (TRAP) activity, oxygen-derived free radical production, and formation of characteristic resorption lacunae on slices of sperm whale dentine. OIF (50-100 ng/ml) inhibited the capacity of these osteoclasts to form lacunae whether assessed by the number of excavations per slice or by the total area resorbed. OIF (10-100 ng/ml) or TGF beta (10-20 ng/ml) caused a decrease in TRAP activity as well as a reduction in oxygen-derived free radical generation detected by nitroblue tetrazolium staining. TGF beta had no effect on the resorption capacity of isolated osteoclasts in concentrations that inhibited TRAP activity and nitroblue tetrazolium staining. These results suggest that growth regulatory factors, such as OIF and TGF beta, released during the resorption of bone may be endogenous inhibitors of continued osteoclastic activity. This cessation of osteoclast activity may be an essential preliminary step to the new bone formation that occurs at resorption sites during bone remodeling.