We have shown that intermittent parathyroid hormone (PTH) treatment targets proliferating cells in the primary spongiosa of trabecular bone of young rats, resulting in an increased number of osteoblasts. To further characterize these proliferating osteoprogenitor cells, bromodeoxyuridine (BrdUrd) incorporated in vivo, was used as a marker to identify and isolate cells for in vitro studies. Proliferating cells were labeled in vivo in young rats with BrdUrd and 24 h later were isolated by trypsinization of sections of the primary spongiosa of the distal femur metaphysis. Within 12 h of isolation, BrdUrd+ cells formed distinct foci containing 20-500 cells with fibroblast morphology. Stimulation of proliferation as determined by [3H]-thymidine incorporation was observed for these cells in response to fetal bovine serum, platelet derived growth factor, and transforming growth factor beta-1. Neither insulin-like growth factor-1 (IGF-1) nor insulin stimulated proliferation PTH (1-34) and dexamethasone inhibited proliferation. The effects of PTH and dexamethasone were additive. Cells expressed the osteoblast phenotype as evidenced by synthesis of type I collagen, expression of high alkaline phosphatase activity, and production of increased intracellular cAMP in response to PTH (1-34). Confluent cell aggregates spontaneously formed mineralized nodules within 4-7 days, in the absence of inducers. These observations suggest that the primary spongiosa cells recapitulates the differentiation process in vitro in an accelerated fashion and may serve as a useful model to study osteoblast differentiation.