Based on information from partial amino acid sequences of a protein with bone-inducing activity that was purified from a murine osteosarcoma (Dunn type), a cDNA library of the sarcoma was screened to clone a gene complementary to the protein. The cloned cDNA was amplified and transfected into Chinese hamster ovarian (CHO) cells for expression. When the protein produced by the transfected cell line was implanted in combination with pure carrier collagen into allogeneic mice, ectopic ossicles consistently developed at implanted sites within two weeks. The nucleotide sequence of the cDNA and its deduced amino acid sequence were homologous to those of human bone morphogenetic protein-4 (also BMP-2B). In addition, the cDNA and deduced amino acid sequences were identical to those proposed for murine BMP-4 derived from the normal murine fetus. It is postulated that the cloned cDNA encodes the protein responsible for bone formation induced by implantation of devitalized Dunn-type osteosarcoma tissue or cells. The protein product was identified as murine BMP-4, a member of the TGF-beta gene family.