Three stages of osteogenic differentiation can be identified in in vivo diffusion chamber cultures (DCC) of unselected marrow cells, namely, proliferation, differentiation, and maturation (mineralization). These stages were characterized correlatively by in situ differential cell counts, alkaline phosphatase activity, and mineral accumulation. In the present study, the ultrastructure of marrow cell DCC was examined after incubation for 3-21 days. Features characteristic of osteoblastic and chondroblastic differentiation were first noted in 12 day DCC. Sites of osteoblastic differentiation showed cell-cell contacts associated with an increased cell density. The osteoblastic cells had long processes and were embedded in matrix with prominent fiber bundles reminiscent of collagen type I. The chondroblastic cells appeared solitary in areas of lesser cell density. By contrast to the long osteoblastic cell processes, they had short plasmalemmal projections and the matrix surrounding them contained single, thin, short fibers reminiscent of collagen type II, as well as proteoglycan granules. Both cell types showed prominent cytoskeletal elements, rough endoplasmic reticulum, and Golgi. One finding, previously unnoted in differentiating osteogenic cells, was mitochondria with condensed cristae that represent an increased rate of energy metabolism. These mitochondria were particularly abundant in the differentiation stage and declined as the cultures matured. These findings, together with previous reports in the epiphyseal growth plate, suggest that mineralization is associated with an optimal level of energy metabolism rather than extreme hypo- or hyperoxia. The set of ultrastructural parameters defined here in the marrow cell DCC may serve as useful markers for cells undergoing osteogenic differentiation.