We have evaluated the in vivo and in vitro changes in osteoblast characteristics induced by estrogen deficiency and 17 beta-estradiol (E2) treatment in ovariectomized (OVX) rats. Estrogen deficiency induced osteopenia and increased bone turnover, as evidenced by bone histomorphometry at 1, 3, and 6 mo postovariectomy. Bone surface osteoblastic cells (OB) isolated from tibias of OVX rats, OVX rats treated with E2 (10 micrograms/kg body wt), and sham rats showed no difference in alkaline phosphatase activity and osteocalcin production in vitro. In contrast the proliferation rate of OB cells was higher in OVX rats compared with sham rats at all time points post-surgery, as shown by [3H]thymidine incorporation and cell number. The proliferation rate of alkaline phosphatase-positive marrow cells was also higher in OVX rats compared with sham rats. E2 treatment of OVX rats corrected histologic indexes of bone resorption and formation and normalized OB cell proliferation. induced by estrogen deficiency in OVX rats is related to an increased proliferation of osteoblast precursor cells present in the marrow stroma and along the endosteal bone surface.