Human bone marrow contains a population of cells capable of differentiating along multiple mesenchymal cell lineages. Recently, techniques for the purification and culture-expansion of these human marrow-derived Mesenchymal Stem Cells (MSCs) have been developed. The goals of the current study were to establish a reproducible system for the in vitro osteogenic differentiation of human MSCs, and to characterize the effect of changes in the microenvironment upon the process. MSCs derived from 2nd or 3rd passage were cultured for 16 days in various base media containing 1 to 1000 nM dexamethasone (Dex), 0.01 to 4 mM L-ascorbic acid-2-phosphate (AsAP) or 0.25 mM ascorbic acid, and 1 to 10 mM beta-glycerophosphate (beta GP). Optimal osteogenic differentiation, as determined by osteoblastic morphology, expression of alkaline phosphatase (APase), reactivity with anti-osteogenic cell surface monoclonal antibodies, modulation of osteocalcin mRNA production, and the formation of a mineralized extracellular matrix containing hydroxyapatite was achieved with DMEM base medium plus 100 nM Dex, 0.05 mM AsAP, and 10 mM beta GP. The formation of a continuously interconnected network of APase-positive cells and mineralized matrix supports the characterization of this progenitor population as homogeneous. While higher initial seeding densities did not affect cell number of APase activity, significantly more mineral was deposited in these cultures, suggesting that events which occur early in the differentiation process are linked to end-stage phenotypic expression. Furthermore, cultures allowed to concentrate their soluble products in the media produced more mineralized matrix, thereby implying a role for autocrine or paracrine factors synthesized by human MSCs undergoing osteoblastic lineage progression. This culture system is responsive to subtle manipulations including the basal nutrient medium, dose of physiologic supplements, cell seeding density, and volume of tissue culture medium. Cultured human MSCs provide a useful model for evaluating the multiple factors responsible for the step-wise progression of cells from undifferentiated precursors to secretory osteoblasts, and eventually terminally differentiated osteocytes.