Bone formation in organ cultures of intact marrow fragments from mouse is described. Marrow explants were cultured on the top surface of a millipore filter at a gas-liquid interface. Observations with both light- and electron microscopes demonstrated the formation of a well-organised trabecular matrix lined with osteoblast-like cells. The tissue and cells were positive for alkaline-phosphatase activity. Large amounts of thick, well-banded collagen fibrils and matrix vesicles typical of those found in bone were present. The tissue became mineralised in the presence of 10 mM Na-beta-glycerophosphate; in its absence a similar trabecular matrix developed but mineralisation did not take place.