Among the stromal elements in mammalian and avian bone marrow there exists a pluripotent subset of cells which we refer to as mesenchymal stem cells (MSCs). These cells can be isolated and will proliferate in culture. When such subcultured cells are introduced into porous tricalcium phosphate-hydroxyapatite ceramic cubes and implanted subcutaneously into syngeneic or immunocompromised hosts, the passaged MSCs are observed to differentiate into bone and cartilage. Heretofore, those assays have been conducted with MSCs which had been maintained in vitro in serum-containing medium. A serum-free medium (RDM-F), which consists of insulin, 5 micrograms/ml, linoleic acid-bovine serum albumin, 0.1%, platelet-derived growth factor-BB, 10 ng/ml, and basic fibroblast growth factor, 1 ng/ml in a base medium of 60% Dulbecco's modified Eagle's medium with low glucose and 40% MCDB-201, has been developed for rat marrow-derived MSCs. Proliferation rates of MSCs maintained in RDM-F equal those of cells maintained in serum-containing medium through Day 4 following subculturing and continue at up to 80% of the rate of the latter through Day 8 of subculture. When tested in the in vivo ceramic cube assay, MSCs cultured in RDM-F retain their osteochondral potential and differentiate into bone and cartilage in a manner indistinguishable from those cultivated in serum-containing medium. Utilization of this serum-free medium will facilitate analysis of the effects of other growth factors and cytokines on the proliferation and differentiation of MSCs, without the complexity of exogenous serum.