Recent studies indicate that one of the major functions of the apical ectodermal ridge (AER) of the embryonic chick limb bud is to maintain mesenchymal cells directly subjacent to it (i.e., cells extending 0.4-0.5 mm from the AER) in a labile, undifferentiated condition. Furthermore, when mesenchymal cells are freed from the AER's influence, either artifically or as a result of normal polarized proximal-to-distal limb outgrowth, they are freed to commence cytodifferentiation. In a preliminary attempt to investigate at a molecular level the mechanism by which the AER exerts its "negative" effect on the cytodifferentiation of subridge mesenchymal cells, we have examined the effect of a variety of agents that elevate cyclic AMP levels on the chondrogenic differentiation of the unspecialized subridge mesoderm of the limb bud in an organ culture system. Dibutyryl- and 8-hydroxy-cyclic AMP elicit a dose-dependent increase in the rate and amount of cartilage matrix formation and a corresponding dose-dependent increase in sulfated glycosaminoglycan accumulation by subridge mesoderm explants. The stimulatory effect of suboptimal concentrations of cyclic AMP derivatives is potentiated by the addition of theophylline. The stimulatory effect is limited to cyclic AMP derivatives, since dibutyryl-cyclic GMP and 5'-AMP have no effect. Thus agents that elevate intracellular cyclic AMP levels stimulate the chondrogenic differentiation of the unspecialized subridge mesoderm of the embryonic chick limb bud.