Studies using animal tissue suggest that bone marrow contains cells with the potential to differentiate into cartilage and bone. We report the extension of these studies to include human marrow. Bone marrow from male and female donors of various ages was obtained either from the femoral head or as aspirates from the iliac crest, and introduced into culture. Culture-adherent cells were expanded, subcultured, and then tested for bone and cartilage differentiation potential utilizing two different in vivo assays in nude mice. One assay involved subcutaneous implantation of porous calcium phosphate ceramics loaded with cultured, marrow-derived, mesenchymal cells; the other involved peritoneal implantation of diffusion chambers, also inoculated with cultured, marrow-derived, mesenchymal cells. Histological evaluation showed bone formation in ceramics implanted with cultured, marrow-derived, mesenchymal cells originating from both the femoral head and the iliac crest. Immunocytochemical analysis indicates that the bone is derived from the implanted human cells and not from the cells of the rodent host. No cartilage was observed in any of these ceramic grafts. In contrast, aliquots from the same preparations of cultured, marrow-derived, mesenchymal cells failed to form bone or cartilage in diffusion chambers. These data suggest that human marrow contains cells with osteogenic potential, which can be enriched and expanded in culture. Our findings also suggest that subcutaneous implantation of these cells in porous calcium phosphate ceramics may be a more sensitive in vivo assay than diffusion chambers for measuring their osteogenic lineage potential.