Rat bone marrow cells were cultured in vitro in a collagen-gel medium at 0.5% fetal bovine serum concentration for 10 days in the presence of recombinant human transforming growth factor-beta-1, genetically engineered to contain a collagen binding domain (rhTGF-beta1-F2), or a commercial rhTGF-beta1. To compare the effects of TGF-betas with other growth factors in which the osteogenic capacity has been widely documented, a recombinant human bone morphogenetic protein (rhBMP-2) was evaluated. Once serum conditions compatible with growth were re-established, the selected cells were cultured for 6 more days in the presence of the growth factor. In the last 2 days, dexamethasone (dex) and beta-glycerophosphate (beta-GP) were added to promote osteogenesis. After this 16-day period, cells were placed into diffusion chambers or demineralized bone matrix (DBM) implants, and implanted subdermally on the backs of rats for 28 days. Biochemical, histological, and immunohistochemistry analysis provided evidence of cartilage (commercial rhTGF-beta1-treated cells), osteoid (rhTGF-beta1-F2-treated cells), and bone tissues (rhBMP-2 treated cells), inside the diffusion chambers, whereas bone, cartilage, and osteoid were observed inside the DBM implants under any of the three growth factors effect. Our study advances the technology capable of selecting a cell population from bone marrow that, in the presence of rhTGF-beta1 or rhBMP-2 in vitro, achieves chondro-osteogenic potential in vitro and in vivo.