Transforming growth factor-beta (TGF-beta) is known to regulate chondrocyte proliferation and hypertrophic differentiation in embryonic bone cultures by a perichondrium dependent mechanism. To begin to determine which factors in the perichondrium mediate the effects of TGF-beta, we studied the effect of Insulin-like Growth Factor-1 (IGF-I) and Fibroblast Growth Factors-2 and -18 (FGF2, FGF18) on metatarsal organ cultures. An increase in chondrocyte proliferation and hypertrophic differentiation was observed after treatment with IGF-I. A similar effect was seen after the perichondrium was stripped from the metatarsals suggesting IGF-I acts directly on the chondrocytes. Treatment with FGF-2 or FGF-18 resulted in a decrease in bone elongation as well as hypertrophic differentiation. Treatment also resulted in a decrease in BrdU incorporation into chondrocytes and an increase in BrdU incorporation in perichondrial cells, similar to what is seen after treatment with TGF-beta1. A similar effect was seen with FGF2 after the perichondrium was stripped suggesting that, unlike TGF-beta, FGF2 acts directly on chondrocytes to regulate proliferation and hypertrophic differentiation. To test the hypothesis that TGF-beta regulates IGF or FGF signaling, activation of the receptors was characterized after treatment with TGF-beta. Activation was measured as the level of tyrosine phosphorylation on the receptor. Treatment with TGF-beta for 24h did not alter the level of IGFR-I tyrosine phosphorylation. In contrast, treatment with TGF-beta resulted in and increase in tyrosine phosphorylation on FGFR3 without alterations in total FGFR3 levels. TGF-beta also stimulated expression of FGF18 mRNA in the cultures and the effects of TGF-beta on metatarsal development were blocked or partially blocked by pretreatment with FGF signaling inhibitors. The results suggest a model in which FGF through FGFR3 mediates some of the effects of TGF-beta on embryonic bone formation.