The perichondrium and periosteum have recently been suggested to be involved in the regulation of limb growth, serving as potential sources of signaling molecules that are involved in chondrocyte proliferation, maturation, and hypertrophy. Previously, we observed that removal of the perichondrium and periosteum from tibiotarsi in organ culture resulted in an overall increase in longitudinal cartilage growth, suggesting negative regulation originating from these tissues. To determine if the perichondrium and periosteum regulate growth through the production of diffusible factors, we have tested various conditioned media from these tissues for the ability to modify cartilage growth in tibiotarsal organ cultures from which these tissues have been removed. Both negative and positive regulatory activities were detected. Negative regulation was observed with conditioned medium from (1) cell cultures of the region bordering both the perichondrium and the periosteum, (2) co-cultures of perichondrial and periosteal cells, and (3) a mixture of conditioned media from perichondrial cell cultures and periosteal cell cultures. The requirement for regulatory factors from both the perichondrium and periosteum suggests a novel mechanism of regulation. Positive regulation was observed with conditioned media from several cell types, with the most potent activity being from articular perichondrial cells and hypertrophic chondrocytes.