Estrogens play a crucial role in the development of postmenopausal osteoporosis. However, the mechanism by which estrogens exert their effects on bone is unknown. To examine possible direct effects of 17 beta-estradiol on bone-forming cells, we used pure rat osteoblast-like cells in vitro as a model. Osteoblast-like cells prepared from calvaria of newborn rats were cultured serum-free in methylcellulose-containing medium for 21 days. Osteoblast-like cells proliferate selectively into clonally derived cell clusters of spherical morphology. 17 beta-Estradiol at concentrations of 0.1 nM and 1 nM enhanced osteoblast-like cell proliferation by 41% and 68% above vehicle-treated controls. The biologically inactive stereoisomer 17 alpha-estradiol (same concentrations) had no effect. Moreover, the antiestrogen tamoxifen abolished the stimulation of osteoblast-like cell proliferation by 17 beta-estradiol. After 21 days of culture, RNA was prepared and analyzed in a dot-hybridization assay for the abundance of pro alpha 1(I) collagen mRNA. Steady-state mRNA levels were increased in cultures treated with 17 beta-estradiol in a dose-dependent manner with maximal stimulation at 1 nM and 10 nM. At the same concentrations, the percentage of synthesized protein (labeled by [3H]proline pulse) that was digestible by collagenase was increased, indicating that 17 beta-estradiol acts at pretranslational levels to enhance synthesis of bone collagen. These data show that the osteoblast is a direct target for 17 beta-estradiol.