Abstract The multipotential murine embryonic C3H10T1/2 mesenchymal cell line is able to undergo chondrogenesis in vitro, in a high density micromass environment, following treatment with soluble human bone morphogenetic protein-2 (BMP-2). To enhance this process, the human BMP-2 cDNA was cloned into a retroviral expression vector and a high titer, infectious retrovirus (replication defective) was generated. Infection of C3H10T1/2 cells with this retroviral construct resulted in an infection efficiency of 90 – 95 % and was highly effective in converting cells in micromass culture to a chondrocyte phenotype, as assessed by positive Alcian blue staining for extracellular matrix proteoglycans, increased sulfate incorporation, increased expression of the cartilage marker genes collagen type II and aggrecan, and decreased expression of collagen type I. Interestingly, BMP-2 expression in the micromass cultures also induced the expression of the cell cycle inhibitory protein/differentiation factor p21/WAF1, suggesting its functional involvement in chondrogenesis. The chondrogenic effect of retrovirally expressed BMP-2 in these high-density cultures was limited to the infected cells, since uninfected cells did not chondrify when co-cultured as a nonoverlapping micromass adjacent to BMP-2 expressing cells. These data indicate that retrovirally expressed BMP-2 is highly effective at inducing a chondrocyte phenotype in a multipotential mesenchymal cell line in vitro, and its action is restricted to the infected cell population. These findings should provide a framework for the optimization of chondrogenesis in culture using mesenchymal stem cells and retroviral gene transfer.