Bone explants from foetal and newborn rabbits synthesize and release a collagenase inhibitor into culture media. Inhibitor production in the early days of culture is followed first by latent collagenase and subsequently active collagenase in the culture media. A reciprocal relationship exists between the amounts of free inhibitor and latent collagenase in culture media, suggesting strongly that the inhibitor is a component of the latent form of the enzyme. Over 90% of the inhibitory activity of culture media is associated with a fraction of apparent mol.wt. 30000 when determined by gel filtration on Ultrogel AcA 44. The inhibitor blocks the action of rabbit collagenase on both reconstituted collagen fibrils and collagen in solution. It inhibits the action of either active collagenase or latent collagenase activated by 4-aminophenylmercuric acetate. Latent collagenase activated by trypsin is usually much less susceptible to inhibition. The activity of the inhibitor is destroyed by heat, by incubation with either trypsin or chymotrypsin and by 4-aminophenylmercuric acetate. Collagenase activity can be recovered from complexes of enzyme (activated with 4-aminophenylmercuric acetate) with free inhibitor by incubation with either trypsin or 4-aminophenylmercuric acetate, at concentrations similar to those that activate latent collagenase from culture media. The rabbit bone inhibitor does not affect the activity of bacterial collagenase, but blocks the action of collagenases not only from a variety of rabbit tissues but also from other mammalian species.