Transforming growth factor beta (TGF-beta) regulates cell growth and differentiation. Since it is abundant in bone, we have studied the effect of the polypeptide upon the growth and phenotypic expression of murine osteoblastic cells in monolayer culture. Its actions were compared to those of epidermal growth factor (EGF), another hormonally active polypeptide known to alter bone cell function. Picogram amounts of TGF-beta were found to inhibit the growth and phenotype (alkaline phosphatase and cAMP response to parathyroid hormone) of the clonal nontransformed MC3T3-E1 osteoblastic cell line. EGF also inhibited phenotypic expression, although at higher (nanogram) concentrations, but stimulated cell growth. The low concentration of TGF-beta required to inhibit growth and phenotype of osteoblastic cells together with its abundance in bone suggest that TGF-beta may be an important regulator of bone cell function.