Human bone marrow stromal cells were examined for their osteogenic potential in an in vitro cell culture system. Dexamethasone (Dex) treatment induced morphological transformation of these cells from an elongated to a more cuboidal shape, increased their alkaline phosphatase activity and cAMP responses to PTH and prostaglandin E2, and was essential for mineralization of the extracellular matrix. Dex-induced differentiation of human bone marrow stromal cells was apparent after 2-3 days of treatment and reached a maximum at 7-14 days, as judged by alkaline phosphatase activity, although induction of osteocalcin by 1,25-dihydroxyvitamin D3 was attenuated by Dex. Withdrawal of Dex resulted in an enhancement of the 1,25-dihydroxyvitamin D3-induced secretion of osteocalcin, whereas alkaline phosphatase activity and the cAMP response to PTH remained at prewithdrawal levels. The steady state mRNA level of osteonectin was not affected by Dex. Our results, which demonstrate that Dex conditions the differentiation of human bone marrow osteogenic stromal cells into osteoblast-like cells, support the hypothesis of a permissive effect of glucocorticoids in ensuring an adequate supply of mature osteoblast populations. Furthermore, the established human bone marrow stromal cell culture provides a good model of an in vitro system to study the regulation of differentiation of human bone osteoprogenitor cells.