The relationship of cell proliferation to the temporal expression of genes characterizing a developmental sequence associated with bone cell differentiation was examined in primary diploid cultures of fetal calvarial derived osteoblasts by the combined use of autoradiography, histochemistry, biochemistry, and mRNA assays of osteoblast cell growth and phenotypic genes. Modifications in gene expression define a developmental sequence that has 1) three principle periods--proliferation, extracellular matrix maturation, and mineralization--and 2) two restriction points to which the cells can progress but cannot pass without further signals--the first when proliferation is down-regulated and gene expression associated with extracellular matrix maturation is induced, and the second when mineralization occurs. Initially, actively proliferating cells, expressing cell cycle- and cell growth-regulated genes, produce a fibronectin/type I collagen extracellular matrix. A reciprocal and functionally coupled relationship between the decline in proliferative activity and the subsequent induction of genes associated with matrix maturation and mineralization is supported by 1) a temporal sequence of events in which there is an enhanced expression of alkaline phosphatase immediately following the proliferative period, and later, an increased expression of osteocalcin and osteopontin at the onset of mineralization; 2) increased expression of a specific subset of osteoblast phenotype markers, alkaline phosphatase and osteopontin, when proliferation is inhibited by hydroxyurea; and 3) enhanced levels of expression of the osteoblast markers as a function of ascorbic acid-induced collagen deposition, suggesting that the extracellular matrix contributes to both the shutdown of proliferation and the development of the osteoblast phenotype.