Sodium alginate is a useful polymer for the encapsulation and immobilization of a variety of cells in tissue engineering because it is biocompatible, biodegradable and easy to process into injectable microbeads. Despite these properties, little is known of the efficacy of calcium cross-linked alginate gel beads as a biodegradable scaffold for osteogenic cell proliferation and differentiation. In this study, we investigated the ability of rabbit derived bone marrow cells (BMCs) to proliferate and differentiate in alginate microbeads and compared them with BMCs cultured in poly-L-lysine (PLL) coated microbeads and on conventional 2D plastic surfaces. Results show that levels of proliferation and differentiation in microbeads and on tissue culture plastics were comparable. Cell proliferation in microbeads however diminished after fortification with a coating layer of PLL. Maximum cell numbers observed were, 3.32 x 10(5) +/- 1.72 x 103; 3.11 x 10(5) +/- 1.52 x 10(3) and 3.28 x 10(5) +/- 1.21 x 10(3 ) for the uncoated, PLL coated and plastic surface groups respectively. Alkaline phosphatase and protein expressions reflected the stage of cell differentiation. We conclude that calcium cross-linked alginate microbeads can act as a scaffold for BMC proliferation and osteogenic differentiation and has potential for use as 3D degradable scaffold.