Cyclic AMP (cAMP) has been implicated in the regulation of limb cartilage differentiation. This study represents an attempt to clarify potential mechanisms by which cAMP might regulate chondrogenesis. We have found that the ability of cAMP to stimulate limb cartilage differentiation in vitro is dependent on cell density. Dibutyryl cAMP (dbcAMP) elicits a striking increase in the accumulation of Alcian blue, pH 1.0-positive cartilage matrix, and a corresponding three- to fourfold increase in the accumulation of 35S-labeled glycosaminoglycans (GAG) by limb mesenchymal cells cultured in low serum medium at densities greater than confluence (i.e. micromass cultures established with 1-2 x 10(5) cells in 10 microliters of medium). Moreover, dbcAMP causes a striking (two- to fourfold) increase in the steady-state cytoplasmic levels of mRNAs for cartilage-characteristic type II collagen and the core protein of cartilage-specific sulfated proteoglycan in these high density, supraconfluent cultures. In contrast, cAMP does not promote the chondrogenesis of limb mesenchymal cells cultured at subconfluent densities (i.e. cultures initiated with 2.5-5 x 10(4) cells in 10 microliters of medium). In these low density cultures, dbcAMP does not promote the formation of cartilage matrix, sulfated GAG accumulation or the accumulation of cartilage-specific mRNAs. These observations suggest that cAMP may exert its regulatory effect in part by facilitating cell-cell communication during the critical condensation phase of chondrogenesis.