Background: Destruction of cartilage in osteoarthritis is a direct effect of an imbalance between catabolic and anabolic activities in the tissue. While a great deal is known about catabolism, we sought to determine the biochemical basis of the anabolic activity. Methods: Cartilage was isolated from normal and osteoarthritic patients and subjected to both cell and explant culture. mRNA expression levels of the growth and differentiation factors bone morphogenetic protein-2 (BMP-2), BMP-4, BMP-6, cartilage-derived morphogenetic protein-1 (CDMP-1), connective tissue growth factor (CTGF), and activin were determined. BMP-2 was localized in osteoarthritic cartilage by immunohistochemistry. To determine the mechanism of BMP-2 stimulation, chondrocytes were cultured with TGF-β (transforming growth factor-β), insulin-like growth factor-1 (IGF-1), interleukin-1β (IL-1β), and tumor necrosis factor-α (TNF-α). The BMP-2 response was monitored by quantitative real-time polymerase chain reaction to ascertain mRNA levels and by Western blot analysis, BMP-2 protein quantitation, and immunohistochemistry to determine protein levels. Results: BMP-2 was found to be up-regulated in osteoarthritic chondrocytes and cartilage. In cell culture, IL-1β and TNF-α increased BMP-2 mRNA and protein levels by eightfold and fifteenfold, respectively, whereas IGF-1 and TGF-1β had no effect. In cartilage explant cultures, IL-1β and TNF-α increased BMP-2 levels both intracellularly and extracellularly. Functional relevance was suggested by co-localization of BMP-2 and newly synthesized type-II procollagen within the same cells. Conclusions: BMP-2 acts as a stimulus of anabolic activities in normal and osteoarthritic chondrocytes. Furthermore, the pro-inflammatory cytokines IL-1β and TNF-α, known to be present in synovium and cartilage of patients with osteoarthritis, stimulate the production of active BMP-2. Clinical Relevance: These results suggest that, in addition to their role in catabolism of cartilage in osteoarthritis, the pro-inflammatory cytokines IL-1β and TNF-α may stimulate anabolic events through production of BMP-2. BMP-2, in turn, increases the synthesis of chondrocyte extracellular molecules, aggrecan and type-II collagen. Consequently, local inflammatory events may contribute to the remodeling or repair of cartilage.