We have approached the study of growth factors affecting cartilage and bone development by investigating those factors present in bone which are able to initiate new cartilage and bone formation in vivo. This has led to the identification and molecular cloning of seven novel human factors which we have named BMP-1 through BMP-7. Six of these molecules are related to each other, and are also distantly related to TGF-β. The presence of one of these molecules, recombinant human BMP-2 (rhBMP-2) is sufficient to produce the complex developmental system of cartilage and bone formation when implanted subcutaneously in a rat assay system. In this model, administration of rhBMP-2 ultimately results in the formation of a piece of trabecular bone, which is filled with mature bone marrow. While our studies demonstrate that rhBMP-2 by itself has the ability to induce cartilage and bone formation in vivo, we find other BMP molecules present along with BMP-2 in our highly purified nonrecombinant bone-inductive material. These results suggest that the bone inductive capacity of bone-derived proteins may reside in the combinatorial or synergistic activities of this set of BMP-2 related molecules.