1. Isografts of articular cartilage of young rats, with mucoproteins labelled with ³⁵S, extracellular fibrous proteins labelled with ³H-glycine, and nuclei labelled with ³H-thymidine, were transplanted into the anterior chamber of the eye.

2. Thin split-thickness transplants of the cells of the gliding surface of immature articular cartilage induced the formation of fibrous tissue.

3. Thick transplants and subsurface slices of immature articular cartilage, containing germinal cells of the epiphysial cartilage, induced the formation of new bone consistently within 4 weeks.

4. Full-thickness transplants in articular cartilage from senile rats induced only the formation of fibrous tissue.

5. Slices of growing cartilage, devitalised by cryolysis, or extraction of acid-soluble proteins, produced scanty deposits of bone or cartilage, or both, but only infrequently and generally after a lag phase extending from six to twelve weeks.

6. Reduction in the amount of mucoprotein in the cartilage matrix by papain, and suppression of the resynthesis of tissue proteins by cortisone, retarded but did not prevent bone induction.

7. Bone induction is the product of a series of interactions between inducing cells and responding cells by intracellular and intercellular reactions too complex to characterise in physico-chemical terms at this time.

1. Autografts, isografts and homografts of fibrocartilaginous callus were observed in the anterior chamber of the eye in rats. Proliferation of cartilage ceased, endochondral ossification followed, and the end-product was a new and complete ossicle with a cortex and a marrow cavity. The size and shape of the ossicle was determined by the size and shape of the sample of callus. Thus the callus in the eye performed the function of a cartilage model like that of the developing epiphysis or a healing fracture of a long bone.

2. Fibrocartilaginous callus, heavily labelled with ³H-thymidine, was transplanted to the eye twenty-four hours after the last injection, when there was little if any radioactive thymidine circulating in the blood. A few small chondrocytes with labelled nuclei persisted in the cores of new bone trabeculae, but the largest part of the labelled callus was resorbed and replaced by unlabelled new bone.

3. Homografts of labelled callus produced the same results as autografts at twenty-five days, but between twenty-five and forty-five days the donor cells were destroyed by the immune response of the host.

4. Isogenous transplants in host rats treated with ³H-thymidine between nine and thirteen days, when the callus was invaded by new blood vessels, produced many osteogenetic cells with labelled nuclei and made it possible to trace the origin of the new bone. The label appeared in the progenitor cells within twenty-four hours. While remaining thereafter in progenitor cells, it appeared also in osteoclasts (or chondroclasts) and osteoblasts in forty-eight to seventy-two hours, and in osteocytes in ninety-six to 120 hours. Chondrocytes did not proliferate and were not labelled in the eye.

5. Homogenous transplants in host rats treated with ³H-thymidine between five and one days before the operation also produced new bone, but contained no labelled osteoprogenitor or bone cells after twenty-five days in the eye. At forty-five days the donor tissue had been destroyed by the immune response of the host.

6. Devitalised callus was encapsulated in inflammatory connective tissue and scar. When the dead callus was absorbed by the capillaries of the host new bone formation by induction produced a scanty deposit as a delayed event in a few instances.

7. Irrespective of whether it originated in the donor or the host, a connective-tissue cell type that proliferated rapidly and became labelled with ³H-thymidine was identified as a progenitor cell. Differentiation and specialisation as osteoprogenitor cells occurred after the growth of blood vessels into the interior of the callus, and developed inside of excavation chambers in cartilage. Except that the interaction of the donor tissue and host cells leading to new bone formation by induction takes place in the interior of the excavation chamber, the biophysico-chemical mechanism is unknown.