The effects of dexamethasone on terminal differentiation and matrix mineralization of epiphyseal chondrocytes were examined using the pelleted culture system of rat costal growth plate chondrocytes as an in vitro model of endochondral ossification. Physiological (1-100 nM) and supraphysiological (1 mu M) concentrations of dexamethasone administered from the prehypertrophic stage produced a dose-dependent decrease in alkaline phosphatase activities, a marker of terminal differentiation, in pelleted cultures. In contrast, less or no significant inhibition of alkaline phosphatase was observed by the addition of dexamethasone from the hypertrophic or matrix-mineralization stage. Treatment with dexamethasone from the prehypertrophic stage resulted in significant effects on mineral growth in pelleted cultures, while dexamethasone added from the hypertrophic or matrix-mineralization stage produced marginal effects on mineral growth. These data indicate that rat growth plate chondrocytes in pelleted cultures may differentially respond to dexamethasone, depending on the stages of differentiation.