Osteoporosis is a common problem of aging and results from a failure of homeostatic mechanisms to regulate osteogenesis and mineralization. Bovine and human forms of fetuin glycoprotein bind to the transforming growth factor (TGF)-beta/BMP (bone morphogenic protein) cytokines and block their osteogenic activity in cell culture assays (Demetriou, M., Binkert, C., Sukhu, B., Tenenbaum, H. C., and Dennis, J. W. (1996) J. Biol. Chem. 271, 12755-12761). Fetuin is a prominent serum glycoprotein and a major noncollagenous component of mineralized bone in mammals. In this study, we show that recombinant fetuin and native serum protein have similar potency as inhibitors of osteogenesis in dexamethasone-treated rat bone marrow cell cultures (dex-RBMC). Recombinant bovine fetuin also bound to TGF-beta1 and BMP-2 in vitro with kinetics similar to native fetuin. Although TGF-beta1 is required for osteogenesis in dex-RBMC, the cytokine also inhibited osteogenesis at concentrations >/=10 pM. Titration of fetuin or anti-TGF-beta1 antibodies into the bone marrow cultures in the presence of 10 pM TGF-beta1 restored osteogenesis, whereas titrations of the same reagents into cultures with 0.3 pM added TGF-beta1 were inhibitory, confirming the biphasic nature of the TGF-beta1 response. Suppression of osteogenesis by both TGF-beta1 and the antagonist proteins required their presence within the first 6 days of culture, well before mineralization at 10-12 days. Northern analysis showed that both fetuin and high dose TGF-beta1 suppressed expression of the bone-associated transcripts alkaline phosphatase, osteopontin, collagen type I, and bone sialoprotein. The suppression of osteogenesis by fetuin and by high dose TGF-beta1 was accompanied by the differentiation of an alternate cell lineage with adipocyte characteristics. In summary, the biphasic osteogenic response to TGF-beta1 suggests that overlapping gradients of TGF-beta/BMP cytokines and fetuin regulate osteogenesis in remodeling bone.