Comparison of the sequence of the N-terminal 30 amino acids of cartilage-inducing factor-A (CIF-A) from bovine demineralized bone with the corresponding sequence of human transforming growth factor-beta (TGF-beta) revealed 100% identity. Furthermore, CIF-A stimulated normal rat kidney fibroblasts to become anchorage-independent and form colonies in soft agar (in the presence of epidermal growth factor) in a manner similar to TGF-beta. Similarly, TGF-beta from human platelets induced rat muscle mesenchymal cells to differentiate and synthesize cartilage-specific macromolecules in a manner equivalent to CIF-A. These data show that CIF-A and TGF-beta are closely related or identical molecules and that these factors may be involved in cell differentiation including cartilage formation as the first step in endochondral bone formation.