BACKGROUND Dedifferentiated parosteal osteosarcoma (dd-POS) designates high grade transformation, of conventional low grade parosteal osteosarcoma (c-POS). The paradigm of preoperative diagnosis, neoadjuvant chemotherapy, and wide local excision has not been adequately evaluated for dd-POS, as it has been for conventional high grade intramedullary osteosarcoma. METHODS A retrospective review was conducted of 28 patients treated at the authors' institution between January 1980 and December 1992 for an osteosarcoma arising on the surface of the bone diagnosed as either c-POS or dd-POS. The clinicopathologic features, diagnosis, treatment, and patient outcome were analyzed. RESULTS A dedifferentiated component was identified in 12 of 28 tumors (43%). Neither the presence of radiolucencies (77% in c-POS and 100% in dd-POS, P = 0.06) nor medullary invasion (42% in c-POS and 50% in dd-POS, P = 0.28) distinguished dd-POS from c-POS. However, all patients who presented with focal hypervascularity on an arteriogram defined the high grade component of dd-POS that was confirmed by selective needle biopsy. This differed significantly (P = 0.00003) from c-POS. None of the patients with c-POS died of the disease (median survival duration, 77 months; range, 16-152 months). Six patients (35%) developed a local recurrence, but five were treated successfully with further surgery. In the dd-POS group, 7 of the 12 patients died of the disease. Ten patients with dd-POS received preoperative chemotherapy (IA cis-diamminedichloroplatinum, IV doxorubicin), and a good response (> 90% necrosis of high grade component) was observed in four. Among patients whose disease was localized, continuous disease free survival was prolonged significantly (P = 0.03) in patients with a good response (median, 75 months) compared with those who responded poorly (median, 13 months). Five patients remained continuously disease free (median, 66 months, range, 29-95 months). CONCLUSIONS Wide surgical excision alone is adequate treatment for patients with c-POS. Recognition of dedifferentiated areas with angiography and percutaneous biopsy of hypervascular areas should prompt the administration of chemotherapy and wide local excision to optimize patient outcome.