Basic fibroblast growth factor (bFGF), a constituent of bone and cartilage matrix, has been shown to be a potent mitogen for osteoblasts and chondrocytes and yet an inhibitor of chondrocyte terminal differentiation in cell culture. To characterize the effect of bFGF on bone formation, whole neonatal murine femora were cultured in the presence or absence of bFGF and a neutralizing antibody against bFGF. In vitro, femoral elongation was provided by cartilage growth only; the calcified diaphyseal zone stained by oxytetracycline did not increase. When bFGF was added to the culture medium, longitudinal growth of the proximal and distal cartilage was inhibited in a dose-dependent manner (p < 0.05), and the number of hypertrophic chondrocytes in the growth plate was reduced. This phenomenon was absent in the presence of a neutralizing antibody, which when given alone significantly promoted femoral elongation. In contrast, in vivo after transplantation into adult mice bearing dorsal skin fold chambers, femora rapidly calcified after revascularization. This observation supports the notion that bone formation largely depends on angiogenesis-mediated events. To verify this hypothesis, angiogenesis and bone formation were quantified using bFGF known to be a stimulator of angiogenesis. Calcification of grafted femora was accelerated by bFGF given intraperitoneally. The neutralizing antibody slightly suppressed angiogenesis and femoral elongation (not statistically significant), whereas intravenous injections of both substances did not reveal a significant modulatory effect. In vivo the effect of systemically administered bFGF was inhomogeneous, but there was a strong correlation between angiogenesis and endochondral calcification (p < 0.001). These results suggest that exogenous bFGF modulates bone formation in vitro by inhibition of terminal differentiation of chondrocytes in the growth plate, and angiogenesis and concomitant in vivo events are pivotal in the promotion of rapid bone formation.