Transforming growth factor(TGF)beta 1 is a potent inhibitor of growth in mouse osteoblastic MC3T3-E1 cells. To isolate genes that are induced by TGF beta 1, the differential screening method was adopted using a cDNA library constructed from cells treated with TGF beta 1 for 4 h. Six independent cDNA clones were isolated (TGF beta-stimulated clone, TSC-5, TSC-36, TSC-115, TSC-128, TSC-160 and TSC-161), the expression of which was increased by TGF beta 1-treatment with maximal expression at 6-10 h. The steady-state levels of TSC-36, TSC-128 and TSC-160 increased almost tenfold, whereas those of TSC-5, TSC-115 and TSC-161 were elevated at most threefold. From partial nucleotide sequences, TSC-160 was found to be identical to rrg (ras-recision gene, lysyl oxidase), and TSC-115 had 80% similarity with tropomyosin cDNA, whereas other genes seemed novel. Expression of TSC-36 and TSC-160 was dramatically decreased in v-Ki-ras-transformed MC3T3 cells or in transformed NIH 3T3 cells (DT), and was recovered to normal levels in a flat revertant (C11). A nearly full-length copy of TSC-36 cDNA was isolated, and an open reading frame indicated that it encodes a protein of 35 kDa. An antiserum was raised against the C-terminal peptide predicted from the nucleotide sequence, and a polypeptide with an approximate molecular mass of 38 kDa was detected in cultured medium of MC3T3-E1 cells. The amino acid sequence of TSC-36 protein was found to have some similarity with follistatin, an activin-binding protein, and a limited similarity with the secreted protein rich in cysteine (SPARC).