The process of recombinant human bone morphogenetic protein‐2 (rhBMP‐2)‐induced endochondral ossification involves (1) the proliferation and differentiation of mesenchymal cells into chondroblasts and osteoblasts; (2) the production and maturation of cartilage and bone matrix; and (3) the differentiation of circulating osteoclast precursor cells into osteoclasts. Currently the molecular mechanisms of these complex sequential events are unknown. It seemed reasonable to us to assume that communication between cells through soluble mediators during bone induction by rhBMP‐2 may play an important role in the sequential differentiation of chondroblasts, osteoblasts, and osteoclasts. We have therefore used a human osteoblast‐like initial transfectant cell line (HOBIT) to study the effect of rhBMP‐2 on gene expression of interleukin‐6 (IL‐6) and transforming growth factor‐β1 (TGF‐β1), both of which affect osteogenesis and ostoeclastogenesis. Our results have demonstrated that rhBMP‐2 acts on HOBIT cells to stimulate expression of IL‐6 and TGF‐β1 genes and the production of IL‐6. Enhancement of gene expression of IL‐6 and TGF‐β1 by rhBMP‐2 was both sensitive (half maximal effect at approximately 10 ng/ml) and potent (maximum induction was approximately four and threefold greater than controls, respectively). Time course studies showed that the induction of TGF‐β1 and IL‐6 mRNA occurs within short periods—4 and 8 hours after exposure to rhBMP‐2, respectively. Interestingly, these effects, however, were not accompanied by the mitogenic action of rhBMP‐2. It suggests that rhBMP‐2 enhances IL‐6 and TGF‐β1 production during osteogenesis and at least in part mediates the complex sequential differentiation of chondroblasts, osteoblasts, and osteoclasts during rhBMP‐2‐induced endochondral ossification. © 1994 wiley‐Liss, Inc.