Reports of the effects of TGF-beta on bone cells are conflicting and controversial. Different cell culture and organ culture models for both osteoblasts and osteoclasts have given different responses. In some the effects are dependent on prostaglandin synthesis, and in others they are prostaglandin independent. To determine the effects of TGF-beta on osteoblasts and osteoclasts in vivo and the role of prostaglandins in mediating these effects, we injected 2.5-5 micrograms TGF-beta into the subcutaneous tissue overlying the calvariae of normal mice for 2-5 days anc compared the morphologic responses in underlying calvarial bone with those in mice injected caused a marked increase in periosteal thickness (fivefold) and cellularity, morphologic changes in osteoblasts, and new mineralized bone formation. These effects were localized to the site of injection and were partially inhibited by concomitant indomethacin treatment. There was a parallel increase in osteoclast numbers in adjacent marrow spaces, and the osteoclasts formed were unusually large. In contrast, no increase in the numbers of osteoclasts was seen in indomethacin-treat animals. These data show that TGF-beta has powerful effects on local bone cell function in vivo and that these effects may be mediated, in part, by prostaglandin generation.