Adipocytes and osteoblasts have common origins from fibroblastic stem cells. Consequently, modulation of the processes of adipogenesis and osteogenesis has implications for the possible treatment of metabolic bone diseases, such as osteoporosis, in which medullary fat accumulates and trabecular bone volume decreases. It is likely that the balance between these two systems is affected by particular endogenous growth factors which are known to affect bone metabolism. We have therefore investigated the effects of transforming growth factor beta (TGFβ), basic fibroblast growth factor (bFGF) and dexamethasone (Dex) on cultured human bone marrow (HBM) fibroblastic cells to observe the effects on adipogenesis and osteogenesis. In the absence of fetal calf serum (FCS), TGFβ caused a dose-dependent increase in cell growth and alkaline phosphatase activity (AP); however, in the presence of FCS growth was inhibited at high concentrations and AP unaffected. TGFβ increased matrix proteoglycan and collagen synthesis. bFGF inhibited AP and increased colony number and size, while Dex treatment increased AP activity and colony number, and both factors in combination resulted in an additive increase in growth. Dex-induced adipocyte formation was accelerated but not increased by bFGF. A significant inhibition of adipogenesis by TGFβ was observed within 7 days. These results demonstrate the importance of biological factors known to be involved in bone remodelling in the regulation of osteogenesis and adipogenesis.