We have developed an in vitro system, using embryonic chicken tibiae grown in a serum-free medium, which exhibits simultaneous bone formation and resorption. Tibiae from 8-day embryos increased in mean (+/- SD) length (4.0 +/- 0.4 to 11.0 +/- 0.3 mm) and dry weight (0.30 +/- 0.04 to 0.84 +/- 0.04 mg) during 12 days in vitro. There was increased incorporation of [3H]proline into hydroxyproline (120 +/- 20 to 340 +/- 20 cpm/mg of bone per 24 hr) as a measure of collagen synthesis, as well as a 62 +/- 5% increase in total calcium and 45Ca taken up as an indication of active mineralization. A physiologic concentration (1 pM) of parathyroid hormone was found to stimulate bone resorption over control levels in this system. Parathyroid hormone stimulated the release of [3H]hydroxyproline from the bone shafts but not from the cartilage ends, indicating the specificity of the response. With 1 pM parathyroid hormone we observed an acute inhibition of bone formation, followed (after 12-16 hr) by a chronic stimulation of bone formation during the 12-day incubation. Both mineral uptake and matrix formation were enhanced at approximately the same rate during the 12-day incubation. The chronic enhancement of formation required parathyroid hormone only for the initial 8-10 hr of incubation. These results could be explained by the production or release of a factor from bone to stimulate formation in response to the acute increase in resorption--a "coupling factor." Indeed, dialyzed culture medium conditioned by actively resorbing bones stimulated bone formation over controls when added to organ cultures at a 1:20 dilution. The factor is larger than 12,000 daltons as determined by dialysis. The factor is specific for the bone shaft and did not affect the cartilage ends.