PTHrP regulates the rate of chondrocyte differentiation during endochondral bone formation. The expression of PTHrP and its regulation by TGF-β, BMP-2, and PTHrP was examined in upper sternal chondrocytes following 1,3, and 5 days of continuous treatment. While TGF-β stimulated the expression of PTHrP (5-fold), PTHrP caused a slight inhibition, and BMP-2 markedly inhibited PTHrP mRNA expression. The effect of these factors on PTHrP expression was not simply related to the maturational state of the cells, since BMP-2 increased, while both PTHrP and TGF-β decreased the expression of type X collagen. TGF-β isoforms 1,2, and 3 all stimulated PTHrP expression. Signaling events involved in the induction of PTHrP by TGF-β were further evaluated in a PTHrP-promoter CAT construct. The effect of TGF-β, BMP-2, and PTHrP on the PTHrP-promoter paralleled their effects on mRNA expression, with TGF-β significantly increasing CAT activity, BMP-2 decreasing CAT activity, and PTHrP having a minimal effect. Co-transfection of the TGF-β signaling molecule, Smad 3, mimicked the effect of TGF-β (induction of PTHrP promoter), while dominant negative Smad 3 inhibited the induction of the PTHrP promoter by TGF-β. Furthermore, infection with a Smad 3-expressing retrovirus mimicked the effects of exogenously added TGF-β, and induced PTHrP mRNA expression in the infected chondrocyte culture. In contrast, a dominant negative Smad 3 completely inhibited PTHrP promoter stimulation by TGF-β, but only partially blocked the effect of TGF-β on PTHrP mRNA synthesis. These findings demonstrate that PTHrP is expressed in chondrocytes undergoing endochondral o classification, and show regulation, at least in part, by TGF-β through Smad mediated signaling events.