Osteoblasts prepared from calvaria of newborn rats produce insulin-like growth factors (IGF) and IGF-binding proteins (IGFBP), IGFBP-5 was discovered in bone extracts. However, we could not detect IGFBP-5 in the medium of newborn rat osteoblasts, although we found mRNA expression. To find an explanation for this discrepancy and to learn more about the physiological role of IGFBP-5 in these cells, we studied the biological activity and the fate of recombinant human (rh) IGFBP-5 in comparison to rhIGFBP-3. IGFBP-5 but not IGFBP-3 stimulated thymidine incorporation into DNA both in the absence and presence of IGF-I. However, IGFBP-5 did not enhance uridine incorporation into RNA and glucose incorporation into glycogen. 125I-rhIGFBP-5 but not 125I-rhIGFBP-3 rapidly disappeared from the culture medium consistent with the observation that endogenous (rat) IGFBP-3 but not IGFBP-5 accumulated in the medium. However, intact 125I-labeled or unlabeled rhIGFBP-5 was associated with the cell-layer matrix, whereas IGFBP-5 fragments appeared in the medium. Trapping of IGFBP-5 in the cell layer matrix may enhance local availability of IGF.