cDNA clones encoding osteoinductive factor (OIF) have been isolated from a bovine osteoblast library. Sequence analysis of these clones indicated that the 105-amino-acid OIF is synthesized as a larger 299-amino-acid precursor, the carboxyl terminus of which is cleaved to yield the mature protein. Northern blot analysis of bovine osteoblast mRNA revealed two OIF-specific transcripts of 1.9 and 2.4 kb. The polymerase chain reaction was used to obtain clones coding for human OIF from the osteosarcoma cell line, MG-63. The human OIF cDNA encodes a precursor of 298 amino acids that exhibits 94% identity to the bovine protein. Northern blot analysis of various cell lines and tissues indicated that expression of OIF transcripts is limited and may be restricted to cells of bone lineage.