The effects of prostaglandin E2 (PGE2) on the proliferation and differentiation of osteoblastic cells were studied in osteoblast-like cells isolated from adult rat calvaria. Treatment of the cells with PGE2 within the concentration range 10(-8)-10(-5) M resulted in a dose-dependent increase in alkaline phosphatase (ALP) activity, [3H]proline incorporation into collagenase-digestible protein, and mineralized bone nodule (BN) formation, as well as a dose-dependent decrease in [3H]thymidine incorporation into the cells. PGE2 also caused a dose-dependent increase in the intracellular cyclic adenosine monophosphate (cAMP) content, with a maximal effective concentration of 10(-5) M; this effect of PGE2 was mimicked by forskolin, an adenylate cyclase activator. The treatment of adult calvarial cells with forskolin decreased BN formation, ALP activity, and collagen synthesis. These results suggested that cAMP does not have a stimulatory, but rather a suppressive, effect on the differentiation of adult rat calvarial cells. A time-course study of cAMP accumulation showed that both PGE2- and forskolin-induced cAMP reached a maximum at 5 min after the treatment, but the former rapidly returned to the basal level by 40 min, while the latter declined slowly and was still at 70% of the maximal level at 60 min, suggesting that PGE2 activates phosphodiesterase as well as adenylate cyclase. The presence of N-(6-aminohexyl)-5-chloro-1-naphthalenesulfonamide (W-7), a calmodulin antagonist, reduced the rate of degradation of cAMP formed after PGE2 treatment, suggesting the involvement of calmodulin in the activation of phosphodiesterase. However, PGE2 also caused the production of inositol 1,4,5-triphosphate (IP3) and an elevation of the intracellular Ca2+ concentration ([Ca2+]i), both of which peaked at 15 s and returned to the basal level within 1 min. Submaximal responses of the IP3 production and the [Ca2+]i elevation to PGE2 were obtained at 10(-5) M. W-7 decreased both basal and PGE2-induced ALP activity, collagen synthesis and BN formation, indicating the involvement of Ca2+/calmodulin-dependent protein kinase in the PGE2-induced differentiation of calvarial cells. From these results, we concluded that PGE2 inhibits the proliferation and stimulates the differentiation of calvarial osteoblasts by elevating the [Ca2+]i through the activation of a phosphoinositide turnover, but not via an activation of adenylate cyclase. We also found that BN formation varies, depending on the time of PGE2 addition, suggesting that responsiveness of the cells to PGE2 may change during the culture period.