Rat stromal bone marrow cells (SBMC) were shown to produce mineralized bone‐like tissue in culture in the presence of dexamethasone, ascorbic acid, and β‐glycerophosphate. The addition of 3 ng/ml of basic fibroblast growth factor (bFGF) resulted in a significant increase in formation of mineralized tissue. The present study was aimed at assessing the effect of bFGF on the proliferation and differentiation of SBMC and on the sequential development of mineralized bone‐like tissue in culture. Transmission electron microscopy of bFGF‐treated cultures demonstrated the development of a multilayered structure resembling mineralized bone tissue consisting of cell layers embedded within a heavy extracellular matrix. The matrix was rich in bundles of collagen fibers associated with extensive mineral deposits consisting of hydroxyapatite as determined by infrared spectrophotometry. The addition of 3 ng/ml of bFGF resulted in significant enhancement of [³H]thymidine and [³H]proline incorporation and protein accumulation by 12‐, 2.5‐, and 2.5‐fold, respectively. bFGF treatment increased cAMP responsiveness, alkaline phosphatase activity, osteocalcin level, ⁴⁵Ca²⁺ deposition, and mineralized‐like tissue formation and induced the earlier expression of these markers in the treated culture. A biphasic sequence of events was observed during the development of mineralized bone‐like tissue in bFGF‐treated and control cultures. The first phase is characterized by cell proliferation and matrix accumulation and is reflected by a progressive increase in [³H]thymidine and [³H]proline incorporation until day 11. The second phase, which follows, is characterized by a sharp decline in cell proliferation and matrix accumulation and a concomitant expression of osteoblast differentiation as reflected by the progressive increase in alkaline phosphatase activity, mineral deposition, and osteocalcin expression. Treatment of cultures with bFGF accentuated this biphasic sequence of events. These results indicate that bFGF has the capacity to stimulate both the growth and the biochemical functions of SBMC obtained from a young adult animal.