In the presence of beta-glycerophosphate and vitamin C, cultures of normal mouse bone marrow cells form three-dimensional structures that stain positive with the Von Kossa technique and express alkaline phosphatase (ALP), collagen type I, and osteocalcin. Little is known about the characteristics and frequency of the cells that contribute to this phenomenon. Most likely, mature osteoblastic cells do not contribute to the nodule formation because no osteocalcin expressing cells are detected in the flushed marrow by in situ hybridization. Limiting dilution analysis shows that, in normal bone marrow, 1 of 2.2 x 10(5) cells has the potency to form a bone nodule and to express ALP, collagen, and osteocalcin in a temporal fashion. Upon in vivo treatment with 5-fluorouracil (5-FU), this frequency increases 12-fold, eg, 1 in 1.75 x 10(4) cells shows osteogenic activity. In comparison, fibroblast colony forming cells occur at a frequency of 1 of 2.5 x 10(4) or 1 of 5 x 10(3) plated cells in normal or 5-FU-treated marrow, respectively. Using density centrifugation, the majority of the osteoprogenitor cells in 5-FU marrow are found in the low-density (1.066 to 1.067 g/mL) fractions. In addition, these cells bind to nylon wool but not to plastic and aggregate in the presence of wheat germ agglutinin and soybean agglutinin. Scanning and transmission electron microscopy shows that the bone nodules in 5-FU marrow cultures are composed of fibroblastoid cells embedded in a mineralized collagen matrix. In conclusion, our results show that a quiescent cell population in the murine bone marrow with fibroblastoid characteristics contributes to the formation of bone-like nodules in vitro.