We have previously demonstrated that a chondrocyte-derived TGF-beta inhibits spontaneous endothelial sprout formation in an in vitro model of angiogenesis (Pepper et al., J.Cell.Physiol. 146:170-179, 1991). We suggested that the inhibition might be mediated by an antiproteolytic effect. In this paper, we describe the induction of PAI-1 and PAI-1 mRNA in microvascular endothelial cells by chondrocyte conditioned medium. This effect can be significantly reduced by the addition of anti-TGF-beta antibodies to the conditioned medium, and can be mimicked by the addition of exogenous TGF-beta 1. Taken together with our previous observations, these results demonstrate that the inhibition of endothelial sprout formation occurs concomitantly with an increase in the production of PAI-1, a physiological plasminogen activator inhibitor. This suggests that TGF-beta-induced antiproteolysis is responsible for the inhibition of sprout formation.