In addition to café-au-lait pigmentation patterns and hyperendocrinopathies, fibrous dysplasia of bone is a major finding in the McCune-Albright syndrome. Activating missense mutations of the Gs alpha gene leading to overactivity of adenylyl cyclase have been identified in patients with McCune-Albright syndrome, but the mechanism leading to the specific development of fibrous dysplasia in bone has not been elucidated. By means of specific peptide antisera and reverse transcriptase polymerase chain reaction in situ hybridization, we show that expression of Gs alpha and its mRNA is critically up-regulated during maturation of precursor osteogenic cells to normal osteoblast cells and that this pattern of expression is retained in fibrous dysplasia. A functional characterization of fibrous dysplastic tissues revealed that the fibrotic areas consist, in fact, of an excess of cells with phenotypic features of pre-osteogenic cells, whereas the lesional bone formed de novo within fibrotic areas represents the biosynthetic output of mature but abnormal osteoblasts. These cells are noted for peculiar changes in cell shape and interaction with matrix, which were mimicked in vitro by the effects of excess exogenous cAMP on human osteogenic cells. Osteoblasts involved with the de novo deposition of lesional bone in fibrous dysplasia produce a bone matrix enriched in certain anti-adhesion molecules (versican and osteonectin), and poor in the pro-adhesive molecules osteopontin and bone sialoprotein, which is in contrast to the high levels of these two proteins found in normal de novo bone. Our data indicate the need to reinterpret fibrous dysplasia of bone as a disease of cells in the osteogenic lineage, related to the effects of excess cAMP on bone cell function. They further suggest that a critical, physiological, maturation-related regulation of Gs alpha levels makes cells in the osteogenic lineage a natural target for the effects of mutations in the Gs alpha gene and may provide a clue as to why bone itself is affected in this somatic, mutation-dependent disease.