Two naturally occurring peptides that induce chondrogenesis in culture have been purified to apparent homogeneity. These cartilage-inducing factors (CIF-A and CIF-B) were isolated from bovine demineralized bone by dissociative extraction, gel filtration, cation-exchange chromatography, and reversed-phase HPLC. CIF-A and CIF-B at concentrations of 1-10 ng/ml each induce embryonic rat mesenchymal cells in culture to assume a cartilage morphology and synthesize cartilage-specific proteoglycan and type II collagen. The amino acid compositions of CIF-A and CIF-B are similar but not identical. Both factors have an apparent Mr of 26,000, as determined by NaDodSO4/PAGE. In the presence of 2-mercaptoethanol, both are converted to species of about one-half that Mr, indicating that they are dimers of identical or very similar chains.