Extracellular matrix vesicles, which have been shown to be associated with initial calcification of cartilage, were isolated, characterized, and studied with 45calcium isotope to determine whether they could form mineral in vitro. It was found that the isolated matrix vesicles contain a phosphatase, active at neutral pH, which has a very wide specificity and will hydrolyze a variety of nucleotide triphosphates, diphosphates, monophosphates, and other phosphate-containing substrate and metabolites. Acid phosphatase, beta-glucuronidase, and cathepsin D were found to be in the cell fractions, in lysosomes; these enzymes are not present in matrix vesicles and this is additional evidence for the difference between matrix vesicles and lysosomes. Matrix vesicles were found to take up 45Ca even in the presence of low levels of Ca and P1 and also to facilitate precipitation of hydroxylapatite when incubated under physiological conditions in the presence of ATP and other phosphate-containing substrates. Systematic electron probe analysis of a septum of epiphyseal cartilage indicates that matrix vesicles gradually accumulate calcium and then phosphorus and thus facilitate the advance of the calcification front. Adjoinging nonvesicular matrix in the hypertrophic zone, cell cytoplasm, and cell processes had very low levels of calcium and phosphorus in a region where matrix vesicles showed high levels of these elements. New concepts are put forward that take accounts of these findings which provide a better understanding of the sequence of mineralization in growth cartilage.