We have previously reported that the J774A.1 macrophage-like tumor cell line produces two potent monokines which stimulate the growth of osteoblasts and chondrocytes. These growth factors, which have an affinity for heparin-agarose, have been termed HEP I (a 30 Kd PDGF-like molecule) and HEP II (an approximately 20 Kd molecule), respectively, based on their elution profile. Unlike HEP I, HEP II does not stimulate the growth of fibroblasts. Extensive biological and chromatographic studies disclosed that HEP II appears to be a unique bone cell mitogen unlike any known growth factor, including the FGFs, IL-1s, and TNFs, EGF, IGF-I and -II, TGF-beta, beta 2 microglobulin, G-CSF, CSF-1 and GM-CSF. To characterize more fully the effects of the macrophage-derived monokines on osteoblast growth and function, clones were derived from calvaria explant cultures. Two clones, SDFRC-2.05 and SDFRC-3, were developed and found to exhibit osteoblastic characteristics, including high levels of alkaline phosphatase, synthesis of type I but not type III collagen, and an increased intracellular cAMP production in response to PTH. The SDFRC-3 cells exhibited a polygonal morphology like that of the explant-derived cells while SDFRC-2.05 cells exhibited a more fibroblastic morphology. When tested on the explant cultures and clones, HEP I and HEP II were found to stimulate DNA synthesis and increase protein per culture, but decreased alkaline phosphatase activity. Clone SDFRC-3 was found to be more responsive to HEP II than clone SDFRC-2.05. Both monokines were found to be more potent mitogens for bone cells than TGF-beta. HEP II, but not HEP I or TGF-beta, induced a transformation of bone cells from a polygonal to a fibroblastic morphology, suggesting the induction of migration prior to proliferation. Thus, macrophages may be responsible not only for bone repair but also for ensuring the linkage of bone formation to resorption during physiological remodeling.