The purpose of this study was to examine bone histomorphometry before and after 2 yr of a double blind trial of etidronate to determine whether etidronate was associated with the development of osteomalacia and to clarify the mechanism of action. Sixty-eight postmenopausal women with vertebral compression fractures from 3 clinical centers received 1 g phosphate or placebo twice daily on days 1-3, 400 mg etidronate or placebo daily on days 4-17, and 0.5 g calcium daily on days 18-91. This cycle was given eight times. Iliac crest bone was biopsied after tetracycline labeling. None of the patients developed osteomalacia. The placebo/placebo group lost significantly more bone volume than the other groups. The change in mineralizing surface was significantly different among groups due to the decrease in the placebo/etidronate group. Within groups, placebo/placebo showed a decrease in bone volume without other changes. Phosphate/placebo showed no changes. Placebo/etidronate showed decreases in osteoid volume, osteoid surface, mineralizing surface, bone formation rate, and activation frequency. The only change in phosphate/etidronate was a decrease in osteoid surface. We conclude that 2-yr treatment with cyclical etidronate does not cause osteomalacia and that the mechanism for the increased bone mass is probably a decreased activation frequency.