Osteoclast-like multinucleated giant cells are induced in bone marrow cultures by 1,25-dihydroxyvitamin D3 and other agents. These cells resemble osteoclasts in their morphology, their ability to resorb bone, and the possession of calcitonin receptors. We report here a biphasic effect of transforming growth factor-beta (TGF beta) on the generation of these cells in mouse bone marrow cultures. At low concentrations (10-100 pg/ml) TGF beta enhanced 1,25-dihydroxyvitamin D3-dependent production of osteoclast-like cells, while at higher concentrations TGF beta was inhibitory. Complete inhibition was seen at 4 ng/ml. Antibodies directed against TGF beta significantly reduced the generation of osteoclast-like cells in 1,25-dihydroxyvitamin D3-treated cultures, indicating the contribution of endogenous TGF beta activity. TGF beta also enhanced the accumulation of prostaglandin E2 (PGE2) in a dose-dependent manner. Moreover, we found that the generation of these cells in response to 1,25-dihydroxyvitamin D3 was also dependent on PG accumulation, since it was inhibited by indomethacin (250 ng/ml), and this inhibition could be reversed by exogenous PGE2. It is, thus, suggested that PG activity, probably PGE2, mediates the enhancing effect of low TGF beta concentrations and is required for the generation of osteoclast-like cells in this system.