Chondrocytes isolated from the calvaria of rat fetuses proliferate and form cartilage when cultured in a chemically defined, serum-free medium, suggesting that they may elaborate self-regulatory factors. Conditioned media obtained from these chondrocytes stimulated DNA synthesis and proliferation when added to separate cultures of chondrocytes and the closely related osteoblast-like cells, but were not very effective in skin fibroblasts isolated from the same fetuses, as judged by [3H]thymidine incorporation and cell proliferation. Chondrocyte- conditioned medium also promoted chondrocyte differentiation, augmenting 35SO4 incorporation, and the accumulation of type II collagen and cartilage-specific proteoglycan. Stimulation of growth and differentiation appears to be attributable to separate activities, released into the medium sequentially by the cultured chondrocytes during their proliferation and maturation phases. Media obtained from growing chondrocytes stimulated growth, but had little effect on 35SO4 incorporation. Media obtained from mature cultures promoted growth as well as 35SO4 incorporation. The mitogenic and sulfation activities were trypsin inhibitable, but exhibited different solubility characteristics and striking differences in their patterns of elution from gel filtration columns. These results suggest that chondrocytes elaborate autostimulatory peptides, the biological activities of which mirror, at least in part, the developmental stage of the donor cells.