Bone morphogenetic protein 2B (BMP-2B) also called BMP-4 is one of a family of cartilage and bone-inductive proteins derived from bone matrix and belongs to the transforming growth factor beta (TGF-beta) superfamily. These bone-inductive proteins isolated from adult bone may be involved in bone repair. However, they may also play a role in cartilage and bone formation during embryonic development. To test whether BMP-2B influences cartilage formation by embryonic cells, recombinant human BMP-2B was applied to cultured limb bud mesoderm plated at three different densities. BMP-2B stimulated cartilage formation as assessed by Alcian blue staining and incorporation of radioactive sulfate into sulfated proteoglycans. Cells cultured at all three densities in the presence of 10 ng/ml BMP-2B formed a nearly continuous sheet of cartilage with abundant extracellular matrix and type II collagen. In addition, when cells were cultured in 0.5% serum in the presence of 10 ng/ml of BMP-2B for 5 days there was an increase in alkaline phosphatase as detected by histochemical and biochemical methods. Transforming growth factor beta isoforms (TGF-beta 1 and TGF-beta 2) inhibited sulfate incorporation into proteoglycans in a dose-dependent manner. This inhibition by TGF beta was overcome by recombinant BMP-2B. This study demonstrates that recombinant BMP-2B stimulates cartilage formation by chick limb bud mesoderm in vitro and is further modulated by TGF-beta isoforms.