We investigated the effects of the sex hormone progesterone (Prog) and the synthetic glucocorticoid dexamethasone (Dex) on proliferation and differentiation of progenitor cells of osteogenic, adipocytic, and hemopoietic lineages in cell populations derived from explants of adult female rat lumbar vertebrae. The cell populations were obtained by culturing bone explants in plasma clots immersed in alpha-minimum essential medium plus 10% fetal calf serum (standard medium) and then subculturing the outgrowth cells in standard medium plus 50 micrograms/ml of ascorbic acid, 5 mM beta-glycerophosphate, and with or without Prog or Dex. On day 6 of culture, these populations were analyzed for cAMP responses to parathyroid hormone (PTH), prostaglandin E2 (PGE2), and isoproterenol (IPT). Increases in intracellular cAMP were seen in response to PTH, PGE2, and IPT, and culturing in medium containing Prog increased these responses. At various time periods between days 4-27 of culture, the cultures were evaluated for the presence of bone nodules, alkaline phosphatase (AP)-positive colonies, adipocytes, monocytes, and macrophages. Prog and Dex increased the number of bone nodules and AP-positive colonies. The effect of Prog on bone nodule formation was smaller than that of Dex. In addition, the effect of Dex on bone nodule formation was evident after 10 days of culture, while the Prog-induced effects became significant at days 16-20 of culture. Both hormones also increased the number of Sudan IV-positive colonies (adipocytes), certain types of alpha-naphthyl butyrate esterase (alpha-NBE)-positive colonies (monocytes, macrophages, and T-lymphocytes), and ED2-positive colonies (macrophages). Prog-treated cultures contained more colonies of small spindle-shaped alpha-NBE-positive cells and fewer colonies of small round alpha-NBE-positive cells when compared with Dex-treated cultures. These data indicate that cell populations derived from adult rat lumbar vertebrae contain, among others, osteoprogenitors and progenitors for adipocytes and macrophages that are stimulated to proliferate and differentiate by Prog and Dex. The data also suggest that the effects of Prog and Dex differ qualitatively and quantitatively.