During endochondral bone formation, cartilage cells show increased matrix synthesis and rapid proliferation. We found that cartilage matrix contains at least two types of heparin binding growth-promoting components, One, with a higher affinity to heparin, was identified as chondromodulin I (Hiraki, Y., Tanaka, H., Inoue, H., Kondo, J., Kamizono, A., and Suzuki, F. (1991) Biochem, Biophys, Res, Commun, 175, 871-977), In this study, we isolated a novel growth-promoting component, chondromodulin II, which has a lower heparin affinity, from the dissociative extracts of fetal bovine epiphyseal cartilage. Chondromodulin II stimulated the proteoglycan synthesis in rabbit cultured growth plate chondrocytes, an expression of the differentiated phenotype of chondrocytes. It also stimulated DNA synthesis in chondrocytes in both the absence and the presence of fibroblast growth factor-2. The apparent molecular mass of chondromodulin II on SDS-polyacrylamide gel electrophoresis was 16 kDa, Its complete amino acid sequence was determined by overlapping sequences of the peptides released by endopeptidase digestion and CNBr cleavage, Chondromodulin II consists of 133 amino acids (calculated M(r) = 14,548). The sequence was unique but homologous to the repeats 1 and 2 of the deduced amino acid sequence of the chicken mim-1 gene, which is specifically transactivated by the v-Myb oncogene product in promyelocytes. We also found a minor component with a higher heparin affinity, chondromodulin III, in cartilage extracts, Chondromodulin III stimulated DNA synthesis in chondrocytes in vitro, and its N-terminal sequence was identical with ribosomal protein L31 lacking the N-terminal three amino acids, These findings suggest that the growth and differentiation of chondrocytes are regulated by multiple components in the cartilage matrix.