Transforming growth factor-β1 (TGF-β1) and bone morphogenetic protein-2 (BMP-2) are abundant proteins in the bone matrix. However, their interaction in controlling osteoblast differentiation is not clearly understood. In this study, HBMSCs were cultured in collagen gel matrix with different condition of exogenous rhBMP-2 and TGF-β1 in order to determine the interaction of BMP-2 and TGF-β1 on human bone marrow stromal cells (HBMSCs) differentiation. The cultured cells were analyzed for cell proliferation, alkaline phophatase (ALP) activity and mineralization stainning with Von-Kossa. The cells treated with TGF-β1 exhibited a higher rate of cell growth than those without. However, the cells cultured in collagen gel matrix showed a lower rate of cell growth than the cells cultured in a monolayer. To investigate the effects of both cytokines on osteoblast differentiation, the cells were treated with 0, 1, 5, 10 ng/ml of TGF-β1 for 2 days. This was followed by culturing with 0, 1, 5, and 10 ng/ml of TGF-β1 and 100 ng/ml of rhBMP-2 together for 3 days with the alkaline phosphatase (ALP) activity measured. The cells treated with 1 ng/ml of TGF-β1 responded efficiently to rhBMP-2 and expressed ALP activity with a level equivalent to that exhibited by cells that were not treated with TGF-β1. The cells treated with 5 and 10 ng/ml of TGF-β1 showed a dramatic decrease in ALP activity. The cells treated with 10ng/ml of TGF-β1 followed by rhBMP-2 alone exhibited an intermediate ALP activity. The cells treated with 100 ng/ml of rhBMP-2 demonstrated Von-Kossa positive solid deposits after 3 weeks, while there were few Von-Kossa positive solid deposits when the cells treated with 10 ng/ml of TGF-β1. These results show that TGF-β1 inhibits the effects of rhBMP-2 on the osteoblast differentiation of HBMSCs in a dose dependant manner. Furthermore, the effects of TGF-β1 on HBMSCs are reversible. This suggest that TGF-β1 and rhBMP-2 are coordinately controlled during the osteoblast differentiation of HMBSCs.