Chondrocytes in the endochondral differentiation pathway produce transforming growth factor-beta (TGF-beta) and response to this growth factor both in vitro and in vivo. To clarify the role that cell maturation state plays in the response, we used a well characterized chondrocyte cell culture model which compares cartilage cells at two different stages of maturation. Confluent fourth passage cultures of rat costochondral resting zone and growth zone cartilage cells were incubated with recombinant human (rh) TGF-beta-1 for 24, 48, or 72 h, and the effect on cell number and [3H]thymidine incorporation was observed. To assess whether TGF-beta regulates chondrocyte differentiation to a calcifying cartilage phenotype, cells were incubated for 24 h with TGF-beta, and the specific activities of alkaline phosphatase and phospholipase A2, two enzymes associated with calcification, were assayed in isolated plasma membranes and matrix vesicles. Alkaline phosphatase-specific activity was also measured in the cell layer. Modulation of TGF-beta action by vitamin D metabolites, also known to regulate endochondral differentiation, was examined. The ability of the chondrocytes to produce latent TGF-beta was assayed. The results show that: 1) quiescent chondrocytes at two stages of endochondral maturation respond to rhTGF-beta-1 by increasing [3H]thymidine incorporation; 2) growth zone cells exhibit no increase in cell number over a 72-h incubation with TGF-beta, whereas resting zone cells exhibit a dose-dependent increase in cell number at 72 h; 3) nonquiescent cells exhibit an increase in alkaline phosphatase-specific activity at 24 h; 4) the effects on this membrane enzyme are comparable in the plasma membranes and matrix vesicles, but the net effect is greater in the extracellular organelle due to the intrinsically higher levels of activity; 5) although differentiation is promoted in resting zone cells, it is limited in the growth zone cells by inhibition of phospholipase A2 activity; and 6) there is a synergistic enhancement of resting zone chondrocyte differentiation when cells are exposed to rhTGF-beta-1 and 24,25-dihydroxyvitamin D3.