Using primary murine bone marrow cell cultures, we demonstrate that inhibin suppresses osteoblastogenesis and osteoclastogenesis. In contrast, activin supports osteoblast formation (by alkaline phosphatase-positive and mineralized colony formation); and activin also stimulates osteoclast formation (as measured by staining tartrate-resistant acid phosphatase-positive multinucleated cells). Inhibin, the activin antagonist follistatin, and the bone morphogenetic protein antagonist noggin can all suppress endogenous activin accumulation in bone marrow cultures. Associated with this decrease in activin is the loss of mineralized osteoblastic colony formation (colony forming unit-osteoblast; CFU-OB). However, exogenous activin administration, even in the presence of noggin, permits both alkaline phosphatase-positive and CFU-OB colony formation in vitro. In contrast, the stimulatory effects of locally produced activin on osteoblast and osteoclast development are not likely to be dominant over the suppressive effects of gonadally derived inhibin. The suppressive effect of inhibin is maintained in the presence of either activin or bone morphogenetic protein, suggesting the presence of a distinct inhibin-specific receptor. Taken together, the direct regulation of osteoblastogenesis and osteoclastogenesis by inhibin and activin in vitro suggest that changes in the inhibin/activin ratio detected by bone marrow cells, during the perimenopausal transition, contribute to altered cell differentiation and may be associated with the increased bone resorption observed at this time.