Given the intimate relationship between bone and bone marrow, we hypothesized that the human bone marrow may function as a source (or reservoir) of bone-forming progenitor cells. We observed a population of cells within the bone marrow which produce bone-specific or bone-related proteins. The production of these proteins was developmentally regulated in human long-term bone marrow cell cultures; the bone protein-producing cells (BPPC) are observed under serum-free, short-term culture conditions, respond to bone-related and not hematopoietic growth factors, and are derived from a population of low-density, nonadherent, My10-negative (or low My10 density), marrow cells (My10 is an antigen found on most hematopoietic progenitor cells). Cultivation of marrow-derived BPPC in secondary, serum-containing cultures results in their differentiation into osteoblastlike cells. At this stage of development, BPPC produce an extracellular matrix which incorporates both bone-related proteins and radiolabeled calcium. Human bone marrow BPPC thus represent a newly described cell phenotype important to both bone and hematopoietic cell biology.